Plan, Assess, Verify, Execute
The relationship between strategy and risk management is often ignored or, in some cases, presumed to not exist. However, in reality, the link between strategy and risk management is unmistakable. Each makes the other more effective.
Almost every company has some kind of planning that it is done at, least annually. This could be a formal process with detailed strategies, operating plans and financial projections, or it could be informal, focusing on only a few key areas.
Larger companies comply with Sox or ORSA or employ some form of ERM framework. In small to medium sized companies, the lack of regulatory requirement to implement a formal risk management framework, at times, results in less effective management of risk.
Risk management is not a compliance issue – it is a fundamental management issue.
Being sensitive to costs and resource usage, Global Insurance Partners has developed a process for the small to medium sized insurers to effectively make the link between strategy and risk management. The process is called P-A-V-E, plan, assess, verify, execute.
Plan: Create strategic plan
Assess: Assess existing risks to strategy and evaluate mitigation design. Assess risks created by the strategy and evaluate mitigation design
Verify: Test the effectiveness of mitigation design
Execute: Put the plan into action
Strategy without risk management is like driving at night with no lights. You know where you are going, but cannot see the obstacles ahead of you or possibly even the best route to take
Risk Management without strategy lacks focus and could result in deploying resources ineffectively, missing critical risks or losing opportunities
Small to medium sized companies are often resource constrained. GIP has developed P-A-V-E to address these concerns while providing a mechanism for effective planning and risk management.
P-A-V-E incorporates elements of GIP’s more robust Strategic Planning and ERM service offerings.
The results of the P-A-V-E process will provide companies with a solid strategic framework that considers the potential effects of business risks and their impact on the success of the strategy and the ultimate achievement of corporate goals.
Strategies and risks, once identified, need to be managed. P-A-V-E is the mechanism to do that.