Megrow Goes Fintech – It’s Not about ERM

or is it?

Oracle was very kind to invite me to their innovation summit in May 2018. They choose an auspicious location, namely the Fintech Hub in Singapore. So, the first question was, “what am I going to wear?”. After some deliberation, I decided to wear black jeans, non suspicious Dr. Martens tasseled loafers, an ironed shirt (not tucked in) and use my Freitag laptop bag. That should be enough to blend in smoothly, or so I thought. I stepped out of the elevator, spotted the modern office design and layout and felt elated when I looked around. Post registration, I was escorted to the actual event location. Oh boy was I wrong about the dress code: the Brioni’s, cheaper clone’s thereof and the Louboutins were omnipresent. It turned out to be a banker’s conference, after all….

and then?

A few important take-away messages emerged, so the event was a full success from my point of view (leaving the missed dress code aside…).

key message #1: the world is under-banked, which is not a surprise per se.

key message #2: the all-out banktec disruption (aka the uberisation of banking) is NOT happening; hasn’t happened and won’t happen; period.

key message #3: its now Fintech 2.0/3.0/4.1 (pick your number), where established players and start-ups find ways to leverage on each other’s strength.

These three messages sound very familiar to the insurance community, where the initial believe in an uberisation have largely waned as well. Hence, it’s time to make clever use of smarttech to improve customer experience, reduce operating expenses and reap other benefits. Insurance executives replace “under banked” with “protection gap”. So who copied whom or is this a clear case of convergent evolution?

Thank’s again to Oracle for hosting this event. Hopefully another Innovation Summit will follow soon.

AND ERM?

No, in this post I wont make a case for ERM, although it is tempting to do so. If you feel like “ERM”, read one of the more technical ERM-blogs here.


 

Natural hazards cause ‘un-natural’ disasters that man made!

Dr. Dennis Bessant, senior advisor to Megrow, has written a very interesting article about risk management. Asia Insurance Review  published the articles during the 14th Singapore International Reinsurance Conference.

 

page 1

page 2

Access the full article in pdf-format here.

And before you ask: yes, we have the publisher’s OK to go ahead with this blogpost.



 

COSO ERM Framework Update

COSO ERM Framework

The COSO ERM Framework is one of the best established and most widely used ERM frameworks. Whilst becoming the quasi-standard after its publication in 2004, the framework started getting a little long in the tooth. COSO and PWC just published the “COSO ERM Framework Update”, 2017 version with some fanfare.

COSO ERM 2017 update
Updated COSO ERM Framework
Why update?

Since the original publication in 2004, the risk landscape has evolved dramatically. Back then, big data and cyber were not yet buzz words and the global financial crisis (which wasn’t “global” after all….) was far away. Secondly, practitioners realised that the true value of ERM becomes evident only if companies link ERM to their strategic considerations. Finally, the notion that risk also means opportunity, i.e. ERM is about capturing upside and mitigating downside, gained more traction.

SO WHAT?

The executive summary released by COSO is a hefty 16 pages long. At first glance, this violates every possible rule of “how to write an executive summary”. Maybe it is a symptom of how complex the overall risk and opportunity landscape has become?

I will publish a series of blog posts going a little deeper into the changes that the new framework brought. Stay tuned for more blog posts on Megrow Consulting’s website.

note:

Copyright of the picture is with COSO.



 

ERM increases company valuation

Enterprise Risk Management is viewed favorably by rating agencies, stock exchanges, regulators and other stakeholders – this is all good news.

But some boards and CEOs remain skeptical about ERM’s value: sometimes a perception reigns that ERM is a pure cost, a governance exercise, some box-ticking event, doesn’t deliver any topline and produces nothing but a thick report that nobody reads. The ERM-journey up the risk maturity ladder requires board and management commitment, hence the question arises: what is the return on this investment, in other words how does a CRO convince the board and the CEO that ERM creates value for the company?

Over the past two years two independent, reasonably comprehensive studies have shown that there is a good correlation between good ERM-practice and a company’s valuation – in other words: it pays to do ERM !

Study No.1 says […our results suggest that firms that have reached mature levels of ERM are exhibiting a higher firm value ….] and study No. 2 comes to a similar conclusion stating that […results confirm a significant positive impact of ERM on shareholder value…].

This is very good news for all ERM practitioners, boards and executives of all companies!!


Risk Maturity Ladder is defined here

The valuation implication of ERM maturity. Mark Farrell & Ronan Gallagher, 2014

Determinants and value of ERM. Nadine Gatzert & Michael Martin; 2016

ERM on the move

Great to see how ERM is gaining momentum in emerging markets!

Take a look at “Enterprise Risk Management (ERM) in High-Growth Insurance Markets; The Trust Re Experience”1. I really like the emphasis on “enabling“!!

When we do ERM-related work with our clients, the opportunity-aspect gets a lot of attention. 

Megrow Pte Ltd – your partner for all things ERM.


1 www.trustre.com