Al Sairafi: The Implications of the Global Financial Crisis on the Enterprise Risk Management of Insurance Companies

Researcher: Al Sairafi

The position that risk has occupied in organizations and businesses has evolved dramatically during the last decades. Initially, risk was acknowledged in organisations and business research through its direct relation with the profit or value of the company. Following that, some researchers realized that it is important to link risk to an organisation’s strategy and major objectives as these objectives seek to maximize profit and the firm’s value. Since the structure of the modern organisation has become more complicated, the borders that were designed to distinguish between risks have become blurred.

Therefore, a shift in managing risk from a silo approach to an integrated holistic approach has become essential. Enterprise Risk Management (ERM) has emerged as a framework that emphasizes a wider integrated approach of managing risks. The failure of risk management in coping with the recent global financial crisis was owed in some occasions to the absence of a clear risk management framework or to the missing joints between risk categories in organisations. Through its unique specifications, ERM promises to create more effective management of risks through an integrated approach that aligns all risks to the shareholders’ objectives.

Research Aims:

The aim of the research I am undertaking is to see if the 2007 global financial crisis influenced insurers to adopt a more integrated management of risk. In this research, I am going to discover the behaviour of ERM during good times and bad times. The overall research question is assessing the management’s attitudes towards adopting risk management in the presence of environmental uncertainty.

A case study of three global insurance companies will be conducted namely: Swiss Re Zurich and Royal & Sun Alliance.

There is already some data collected prior to the global financial crisis in relation to this research (approximately 25 interviews) during 2004-2005. I have already got initial consent to use this data from the original researcher who did those interviews. Moreover, I will conduct some interviews with executives and managers from the three studied companies in order to address the shifts of risk management during and after the financial crisis.

The contribution of this research is that it will trace the shifts and changes in the thoughts and practices of the studied three insurance companies regarding managing risks prior, during and after the 2007 global financial crisis. Particularly, more light will be shed on the shifts toward implementation of Enterprise Risk Management and the values that this specific approach could create for the studied insurance companies.