Implementing effective frameworks to better foresee, measure and mitigate emerging risks: Prudential’s approach

Implementing effective frameworks to better foresee, measure and mitigate emerging risks: Prudential’s approach

By Gary Killick, Group Head of Emerging Risk and Anthony Brown, Director, Group Risk, Prudential.

Gary & Anthony, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I’m an experienced risk professional with a background in credit risk management. I’ve come into emerging risk in the last few years, as part of Prudential’s expansion of this function as part ofa general upgrading of the ERM function to support Solvency II, among other things.
Since assuming the lead on emerging risk for the Group earlier in the year, my main focus has been on to building the profile of the function within the organization and on strengthening the quality of analysis; both elements of the process of increasing its relevance to the broader risk management function.

I’m the Director of Group Risk at Prudential, where I’m responsible for our risk governance and policy, operational risk, reporting, and risk ID and prioritization areas. One of my focusses at present is ensuring that our Group wide risk framework is joined up, so that it is clear how emerging risks, modelled risks and non quantifiable risks link together, interact, and can be managed.
I joined Prudential in 2016, and before then I worked in the regulator, both supervising and in policymaking, across banking and insurance. I started my career as an actuary, but these days spend much more time on qualitative as opposed to quantitative risk management.

At the New Generation Operational Risk Europe Summit, you will be speaking on your insight regarding implementing effective frameworks to better foresee, measure and mitigate emerging risks: Prudential’s approach. Can you give a taster as to what risk professionals will gain from your insights?

Hopefully, by sharing the practical insights gained from Prudential’s experience of having implemented our emerging risk function over several years, conference participants will be able to use these lessons to help develop their own emerging risk functions. Similarly, and in the sense that I believe that Prudential has a comprehensive and effective framework for managing emerging risk, it also provides a possible model to consider for those building out their function…

Can you give a brief overview of how prudentials approach to emerging risk has evolved overtime?

I would say that the the process has evolved in two main ways. Firstly, to try and ground the risk identification effort more fully in Prudential’s business profile, so as to increase the relevance of the analysis (and strengthening the case for any associated mitigating actions). Second, to try and foster greater engagement with the emerging risk process across the Group and at all levels with the aim of better harnessing the combined expertise of the organization, as well as helping to further build the profile of the emerging risk function inside the Group.

Why is it important for institutions to reflect on the future of emerging risk management as a discipline and function?

In my opinion, emerging risk is risk management at its “purest”; that is to say an entirely forward looking process that relies fundamentally on human judgement to make educated guesses about the future. As such, it fulfils a unique role within an institution’s “toolkit” of risk management processes; one that has, moreover, become more important over recent years as the operating environment has grown evermore uncertain and as regulators and managements alike seek to avoid a repeat of the missteps that led to the Financial Crisis. For these reasons, it is important that the function is properly resourced and supported by the institution.

What, in your opinion does the future hold for operational risk professionals, and how can they keep up with the increasing change?

In common with many in risk management, operational risk professionals are going to need to be agile, and embracing of the technological and other changes their business is facing. The secret to success will be to make sure you deeply understand the business which you are overseeing, and that your challenges are independent, strong and well considered. To survive in a world of automation your ‘human’ qualities of collaboration, innovation and problem solving will be more necessary than ever.