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From Regulatory-driven Risk Operating Models to Improved ECM and Client Centricity

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From Regulatory-driven Risk Operating Models to Improved ECM and Client Centricity

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What is driving the new thinking around efficiency and innovation among CROs and Actuaries? Which role will Economic Capital Management (ECM) play in the post Solvency II implementation era? This Accenture RiskMinds Insurance presentation will discuss these and other efficiency and innovation topics on CROs’ and CFOs’ agenda. Get new insights from Accenture's Regulatory Insights blog: www.accenture.com/RegulatoryInsights

What is driving the new thinking around efficiency and innovation among CROs and Actuaries? Which role will Economic Capital Management (ECM) play in the post Solvency II implementation era? This Accenture RiskMinds Insurance presentation will discuss these and other efficiency and innovation topics on CROs’ and CFOs’ agenda. Get new insights from Accenture's Regulatory Insights blog: www.accenture.com/RegulatoryInsights

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From Regulatory-driven Risk Operating Models to Improved ECM and Client Centricity

  1. 1. Efficiency and Innovation: From Regulatory-driven Risk Operating Models to Improved ECM and Client Centricity Eric Jeanne and Markus Salchegger Accenture Finance & Risk Services RiskMinds Insurance 2016 Amsterdam, March 23rd 2016
  2. 2. Agenda Technology drivers that require new thinking around efficiency and innovation for Chief Risk Officers and Actuaries Risk management to be applied beyond current corporate areas to help improve Economic Capital Management (ECM) and increase client centricity Conclusion: Technology Vision 2016 – Emerging trends for Insurers Copyright © 2016 Accenture All rights reserved. 2
  3. 3. 3 Insurers are facing increasing constraints in Finance, Risk and Regulatory areas, pushing them to rethink operating models High level challenges and trends in the insurance industry Copyright © 2016 Accenture All rights reserved. Regulatory Pressure • Increasing transparency • Growing financial/reporting standards • Rising complexity Economic Pressure • Continuous low rates environment • Market pressure on financial results • Decreasing amounts of free/available “Own funds” Cost Pressure • Operational efficiency • Cost reductions • Value-adding services New Technologies • Technological innovations (Big Data, Internet of Things, Analytics) • Standardization and automation • Data analytics NEW OPERATING MODEL
  4. 4. 4 Disruptive technologies for efficiency and innovation Digital is impacting the Finance and Risk operating models Copyright © 2016 Accenture All rights reserved. Organization Processes ITData Blockchain Big Data/Analytics Cloud Cyber New vision Working processes Digital risk-awareness New skills Agile methodologies Data-driven decisions Disruptive technologies have placed Finance and Risk functions in a state of digital culture shock, facilitating the use of more technology by their people to perform more, thus gaining a decisive advantage by creating a thriving digital corporate culture Robotics
  5. 5. Robust monitoring and reduction of cost of capital Mini-bots “phantom FTE” automation of tasks and activities 5 Robotics and Blockchain technology is starting to play a significant role in companies’ automation strategy Help insurers become more efficient and eliminate unnecessary intermediaries Copyright © 2016 Accenture All rights reserved. Robotic process automation with focus on repetitive and rule-based processes Cognitive computing – adaptive, interactive technology with ”learning“ capabilities Digital/virtual assistance – computer-generated conversations, question answering... Automation of regulatory reporting and enhanced time efficiency for financial instruments settlement Improved security and transparency of data and information Secure transaction ledger database to reduce the overall number of applications and IT infrastructure costs Organization Processes IT Data BLOCKCHAINROBOTICS
  6. 6. 6 Navigating Finance and Risk IT operations efficiency to realize the flexibility and control to drive agility The new data and IT landscape for the insurance industry Copyright © 2016 Accenture All rights reserved. Organization Processes IT Data Shared services initiative Data-based decisions Reduced processing costs Agile data visualization and leveraging unstructured data Large scale machine learning Multi-enterprise resource planning (ERP) rationalization Mobile enablement Infrastructure investment avoidance Risk reduction strategy 1st line-of-defense controls, countermeasures and protections Risk awareness, modeling and simulations Cyber resilience and data protection Detection, identification and operational monitoring BIG DATA/ ANALYTICS CLOUD COMPUTING CYBER
  7. 7. Agenda Copyright © 2016 Accenture All rights reserved. 7 Technology drivers that require new thinking around efficiency and innovation for Chief Risk Officers and Actuaries Risk management to be applied beyond current corporate areas to help improve Economic Capital Management (ECM) and increase client centricity Conclusion: Technology Vision 2016 – Emerging trends for Insurers
  8. 8. 8 The evolution of Risk Management will play an important role in transforming operating models for improved client centricity The evolution of Risk Management typically follows waves Copyright © 2016 Accenture All rights reserved. RiskManagementEvolutionStages Time 1. Cross-functional Adoptions Adopted in selected, closely related corporate functions such as Finance and Accounting 2. Group-wide Centralization Central provision of RM methods, technology and data for company-wide usage in core insurance domains 3. Next Generation Risk Management Improved client centricity with new touch points and self service
  9. 9. 9 ECM has integrated capital management framework for strategy setting, capital allocation, balance sheet and risk management Example of ECM use to facilitate improved capital allocation Copyright © 2016 Accenture All rights reserved. Enhanced Underwriting to generate top-line growth Improved Capital Management to strengthen profitability across the company/group Robust balance sheet and higher cash generation + = OBJECTIVES IMPLEMENTATION IN FINANCE AND RISK ECM BENEFITS Insight on capital performance and enhanced capitalization Provides opportunity to pre-empt emerging regulatory requirements Transparency of highest value creating activities to support planning, pricing, reserving, steering and strategic decision making Capital Adequacy Risk Management • Owner of ECM, methodology, calibration • ECM output for external prudential reporting Capital Allocation and Steering Financial Planning/Accounting • Scenario analysis to strengthen risk-adjusted returns • Consistent treatment of ECM output across the group • Facilitate decision making on M&A opportunities ENHANCEMENT SCENARIOS CAPACITY
  10. 10. 10 The dynamic of competing for capital within groups and divisions should tremendously change in the future Capital allocation is of greatest importance to insurance groups Copyright © 2016 Accenture All rights reserved. Across insurance groups a consolidated group-wide risk vision aligned to global capital requirements is recommended using an enhanced capital allocation process The “new” capital allocation process should be implemented at the following organizational levels Through the definition of one/multiple common solvency strategic indicator(s) (reflecting group-risk appetite) and which ought to be evaluated by management at each strategic decision point Through an adequate risk limit management process aligned to the company’s global solvency indicator Steering Level Line of Business/Geography/ Business Unit Level KEY SOLUTION ELEMENTS • Usage of prospective tools/methods allowing easy, rapid and accurate capital requirement calculation in line with regulatory framework • Ability to control risk limits at multiple levels of detail (portfolio, business unit, geography, risk module, etc.) with sensitivities conducted based upon market trends and investments choices THE CHALLENGE
  11. 11. 11 Scenario-driven capital allocation approach can generate value in comparison to traditional approach Example of capital excess allocation: scenario-driven approach Copyright © 2016 Accenture All rights reserved. Division IV ECM Group ECM Division I Division II Division III Motor Property Marine ECM 25m 25m 25m 25m 15m 5m 5m ECM ECM CHARACTERISTICS • Capital steering is driven by top-down analysis from the group • Capital is allocated to each division • Divisions subsequently allocate capital to different lines of business • All divisions have ECM modules that are centrally maintained and locally parameterized • ECM across divisions characterized by different levels of sophistication • Capital is allocated on an annual basis as part of the planning process CHARACTERISTICS • All divisions and the group use the same ECM module • Capital can be re-allocated on an ad hoc basis using ECM output • In this example, dynamic scenario analysis detects the “Motor business in Division II” has plateaued => 5m is subsequently re-allocated to group level • Conversely, Division IV requires more capital than forecasted and needs to increase capital (e.g. to support additional risks) • Group can then allocate 5m excess capital to Division IV Top-down Capital Steering Scenario-driven Capital Steering Division IV Group ECM Division I Division II Division III Motor Property Marine 25m 25m 25m 25m 15m 5m 5m ECM 5m5m 5m
  12. 12. 12 Exemplary dimensions drive a comprehensive enterprise-wide customer-centric strategy supported by Risk Management Overview of Risk Management adoption on selected client-centric initiatives Copyright © 2016 Accenture All rights reserved. Improved availability of data per client (not only per product) based on Risk Management insight Improved understanding of the customer risk profile and new demands Increase effectiveness of channels through improved risk-based segmentation of customer groups New products/self-service offerings based on new customer risk demands and/or profiles Disruptive technologies allow insurers to place customers at the center of the right activities, thus improving customer experience and satisfaction Unique Customer View Customer Analytics Campaign Management Customer-oriented Products and Services
  13. 13. Agenda Copyright © 2016 Accenture All rights reserved. 13 Technology drivers that require new thinking around efficiency and innovation for Chief Risk Officers and Actuaries Risk management to be applied beyond current corporate areas to help improve Economic Capital Management (ECM) and increase client centricity Conclusion: Technology Vision 2016 – Emerging trends for Insurers
  14. 14. 14 The Accenture Technology Vision 2016 outlines key trends that also drive future Finance and Risk Architectures Selected Trends – Accenture Technology Vision 2016 Copyright © 2016 Accenture All rights reserved. Do things differently, do different things and create new jobs, products and services Machines will be the newest recruits IT barriers have been eliminated Looking to digital ecosystems for the next waves of change PEOPLE FIRST: The Primacy of People in a Digital Age Predictable Disruption Platforms are trending, and for great reasons. New business models are adaptable, scalable and interconnected Platform Economy Intelligent Automation New technologies require new talents. Liquidity takes on new meaning in the work-force: become adaptable and change-ready Liquid Workforce Source: Accenture Technology Vision 2016: https://www.accenture.com/us-en/insight-technology-trends-2016.aspx
  15. 15. 15 Insurers are in the midst of a digital revolution that is impacting most, if not all, aspects of their business To position themselves for success, insurers are encouraged to seize the opportunities created by emerging trends Copyright © 2016 Accenture All rights reserved. Business model innovation Platform Economy Upgrade business processes Intelligent Automation Enhance organizational efficiency Liquid Workforce Long-term R&D strategy Predictable Disruption Pre-emptive risk mitigation Digital Trust of surveyed insurers see the “Internet of Things” bringing about complete transformation or significant change in the industry of surveyed insurers believe trust is the cornerstone of every business in the digital economy of surveyed insurers expect platform-based business models to become part of their growth strategy in three years of surveyed insurers agree that a more fluid workforce will improve innovation of surveyed insurers are investing more in embedded artificial intelligence solutions 78% 83%82% 83% 85% PEOPLE FIRST Source: Accenture Technology Vision 2016: https://www.accenture.com/pt-en/insight-insurance-technology-vision-2016
  16. 16. 16 Efficiency and Innovation: From Regulatory-driven Risk Operating Models to Improved ECM and Client Centricity Disclaimer This presentation is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals. About Accenture Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions — underpinned by the world’s largest delivery network — Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 373,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Copyright © 2016 Accenture All rights reserved.

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