Reducing Barriers to Risk-Finance Collaboration
Author: Li-May Chew, Associate Research Director, Financial Services Advisory, IDC Financial Insights Asia/Pacific
In my third instalment on the findings from an SAP-commissioned survey, I want to touch on the main barriers preventing more effective collaboration between the risk and finance offices, and conversely – a couple of innovations that could enhance integrations. Even as our survey with 75 insurers globally shows unanimously that respondents need little convincing of the benefits of collaboration, there lies a couple of reasons why some organizations have not found more momentum for such integration projects. Why is it difficult for these two inter-connected business units that have so many similarities – and much to gain – to deepen their relationship?
First, there are the technology hurdles. IT hurdles like limitations from legacy technologies which result in a lack of scalability or interoperability of systems, as well as a lack of robust data systems continue to make it cumbersome to implement an integrated platform. The challenge to moving to an integrated solution is also compounded by issues around fragmented data sources and lack of common language usage implying that there is no single data reference point to support integrated risk-finance reporting.
What Makes or Breaks Integrational Success?
Despite these issues to surmount, it is also comforting to know that insurers are allocating more funds to pursue stronger risk-finance partnerships. Market leaders are already widening their competitive edge by investing in innovations. These investment areas include implementing enterprise information management to integrate data from a variety of sources in real time, and steps to centralize data modeling and flow management. Monies are being directed towards Big Data and advanced analytics to drive intelligent insights and risk-informed decisions on capital optimization. Unified data platforms with compatible data sets and centralized data modeling and flow management are also on the list. Having integrated platforms will help to create an enterprisewide source of truth for the multi-purpose data model, yet reduce internal departmental disputes and total cost of ownership.
It is clear from our conversations that while there has generally been commendable progress, today’s risk-finance partnerships are in transition. There is still work to be done as most insurers attempt to find equilibrium between ensuring effective cross-departmental interdependence while maintaining an ideal degree of independence necessary to preserve both departments’ decision-making.
Are you likewise deliberating over the degree of risk-finance cohesiveness that is appropriate for your organization? We do have some actionable pointers on that in our recently released White Paper, click below to download your copy.