Russell Group’s Basi: Insurance must become more “tactical” in dealing with systemic risk
The insurance industry must become more “strategic” and “tactical” in the face of an increasingly complex risk landscape, driven in part by the evolving nature and definition of systemic risk, according to Russell Group managing director Suki Basi.
Speaking on The Insurer TV’s Close Quarter programme, Basi shared his insights from the Russell Group’s new report, entitled Connected Risk Comes Of Age, which emphasizes the need for the insurance industry to focus more on the importance of “proactive risk management, and the need for collaboration across silos”.
Basi described systemic risk as inconstant: “What was systemic 10 years ago is probably being better analysed today. We should be constantly analysing the landscape, whether that's through horizon scanning or traditional risk analysis, to understand the extremities of risk and begin to understand it better.”
“That's what we mean by understanding systemic risk better. The term ‘systemic risk’ has had a bit of a negative connotation, but in the end, if we are trying to move to a world where we are more resilient and sustainable, then we really need to understand what systemic risk is,” he added.
During the interview, Basi highlighted the need for proactive risk management, saying that the industry “needs to be better at understanding risk before it happens”.
He suggested utilizing horizon scanning, scenario planning, and scenario analysis to anticipate and address potential risks in a more proactive manner.
“By leveraging available data points and learning from past experiences, businesses can make informed decisions and develop effective risk mitigation strategies,” he said.
Breaking down silos
Collaboration, according to Basi, is a “key factor” in managing systemic risk. He also emphasised the need for greater transparency.
“Breaking down silos and fostering collaboration allows businesses to gain a comprehensive view of the risk landscape and develop collective strategies to address systemic risks,” he said.
In order to move beyond “siloed thinking”, Basi said risk management approaches needed to adopt more “cross-silo thinking”.
“If we want to move to a scenario where people are trying to understand the big picture, we have to come together,” he said.
“By breaking down silos and fostering collaboration across different departments and stakeholders, businesses can develop a more holistic understanding of risks and devise effective risk management strategies,” he added.
By fostering transparency, knowledge-sharing, and cross-industry collaboration, businesses can enhance their risk management practices and effectively navigate the challenges of the evolving risk landscape.
“Embracing connected risk is essential for building resilience, ensuring sustainability, and safeguarding the interests of insurers, reinsurers, and their clients,” Basi concluded.