WEF report takes an outside-in look at risk management in financial services sector

“Rethinking Risk Management in Financial Services,” produced by a cross-disciplinary team including Swiss Re, says that practices in other domains such as aviation, fisheries and pharmaceuticals can also be valuable for the financial services industry. The report’s recommendations are aimed at financial services CEOs, regulators and government policymakers.

The financial systems crisis has highlighted the need to improve risk management both at the system-wide and institutional levels in the financial services industry.

Among the report’s recommendations that have been a hallmark of our risk management approach for some time now is one concerning  governance and culture. Good governance, modelling and disclosure are vital to insurance risk management. And risk managers have a vital role to play in creating a pro-active and pre-emptive risk management culture. To achieve this end, they have to become influential and trusted partners to the core business. The fact that Swiss Re has given its Chief Risk Officer a seat at the top table of the organisation – reporting directly to the CEO – underscores our commitment to this goal.

The report also says that risk managers should always be alert to possible trouble and “should be searching relentlessly for early warning signals.” This key finding is at the heart of our methodology for charting emerging risk, known as SONAR. Swiss Re leads the way in this kind of analysis.

We trust that the report will stimulate new thinking and add to the broader discussion aimed at improving the long-term stability of the global financial system.