Even when the DNA is similar “we can’t fix today’s problems with yesterday’s tools”:: Part 1

This quote is from David Cole (Chief Risk Officer, Swiss Re) and, needless to say, he wasn’t talking about fixing his 30 year old VW Golf! He was actually talking about our current “economic ills” and the quote appeared in relation to the 2012 Global Risks report from WEF…but the Principle readily applies to both.

Circa 35 years ago, the engine of a popular family vehicle was a complicated machine, that could be maintained, faults identified, performance improved and mechanical repairs undertaken, even at roadside, by an enthusiastic amateur. Observation, diagnosis or intervention at the appropriate stage in the process was possible. However, in a relatively short period of time, these machines have evolved into highly complex systems. The complexity is such that, even a skilled motor mechanic armed with 30+ years knowledge and tools that have changed little, can be rendered helpless.

An INCOMPLETE guide to risk-based insurance decisions!:: new report from PwC

The momentum that MAY bring us to a, much needed, "tipping point" in Risk Management is certainly gathering!

HOWEVER, this latest report, Strategic risk management: Facilitating risk-based insurance decisions from PwC "disappoints" despite identifying some key elements! It illustrates where we, currently, fall well short of what is required and offers a, dangerously incomplete perspective.

I could not agree much more with the following blurb from PwC. BUT, having skimmed through the report, I do find it incredible that, in 2012 and knowing what we do about the inter-connectedness of business in the Digital Age, a report such as this (that runs to 17 pages) contains no mention of COMPLEXITY!

Many enterprise risk functions do reasonably well identifying, modelling and mitigating "knowable" risks, but face a bigger challenge identifying, quantifying and mitigating more ambiguous ones, such as the ones that characterized the recent financial crisis. Accordingly, we believe that insurers require a strategic risk management (SRM) solution that identifies, assesses and economically manages potentially enterprise-threatening losses over time; in other words, SRM is a way to mitigate evolving risks before they spiral out of control.

Creating a strategic risk management solution for insurance businesses: PwC.