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The Value of Investing in Enterprise Risk Management
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Using a survey of risk management practices in the insurance industry we
examine the impact of enterprise risk management on firm performance. We find
enterprise risk management improves firm operating performance. Firms with
Chief Risk Officers, dedicated risk committees, and risk management entities that
report to Chief Financial Officers experience higher cost efficiency and return on
assets. Confidence that risk is reflected in their business decisions is also
positively related to firm performance. We also find life insurers benefit from the
development and use of economic capital models to a greater extent than
property-casualty insurers. Even simple economic capital models improve the
performance of life insurers.
NONE
Management
English
1-29
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