Risk & capital management

For those working in financial services the past year has been a rollercoaster of a ride. The key question we ask ourselves is how best to act in these volatile times. Despite risk practices being tested to the extreme and, in too many cases, come up short, a risk based approach is still an organisation's best bet for answering this question.

Deeply understanding the risks we accept is a crucial first step. For example, why is this AAA security yielding risk free plus 2%? If we don't understand the risks then are we right to invest?

Our approach is simple built around the basics; your need to identify, assess, select, and manage risks. Using a simple but informed approach allows insurers to develop effective risk and capital management, balancing their desire to achieve target returns for the insurer's capital providers for a given level of risk.

PwC specialises in developing and implementing a range of capital and value management methodologies. These approaches are used for optimising the allocation of capital, including utilising reinsurance and determining investment strategy, and for assessing the impact of strategic decisions on shareholder value.

Our approach is flexible so as to ensure that each company's requirements are met, rather than providing one-size-fits-all solutions. These solutions assist management in improving their business planning processes, as well as improving the quality of management information, in order to ensure effective capital management.

Potential issues

• You want to identify the full set of risks to which you are exposed including operational risks
• You want to assess your risk-based capital requirements
• You want to assess your risk-based value measures
• You want to enhance the management information employed by your risk committees and Board
• You want to enhance your financial modelling suite to allow for enhancements to your management information
• You want to align your financial and risk management information
• You want to select the optimal allocation of capital
• You want to manage your risk portfolio optimally through your pricing, underwriting, reinsurance and investment policies
• You want to introduce risk based remuneration for your staff
• You want to provide risk training to your staff and Board
• You want all of the above group wide and yesterday
• You want risk, capital and value management expertise for one-off special projects
• You want assurance that your risk framework is robust

PwC services may involve

• Design and implementation of risk identification processes such as product reviews and risk and control self assessment, and facilitation of risk workshops
• Design and implementation of risk-based capital assessment
• Design and implementation of risk-based value assessment
• Specification of key indicators and risk dashboards for the various layers of management reflecting the audience
• Design, implementation and validation of financial modelling enhancements
• Design and implementation of risk appetite setting metrics such as economic capital and market consistent embedded value, and facilitation of risk appetite workshops
• Design and implementation of optimisation routines that iteratively seek optimal solutions
• Specification of risk policies for pricing, underwriting, reinsurance and investment departments that provide the crucial link between the day to day business processes and risk appetite
• Design and implementation of a risk based staff remuneration policy
• Design and presentation of risk training to your staff and Board
• Design and implementation of aggregation methodologies and performance improvement around your risk-based management information
• Support your valuation team for your QIS assessment
• Support your internal audit reviews for your Individual Capital Assessment review
• Support your Solvency II project team for your gap analysis
• Support your Solvency II project team with your internal model approval application