Executives know that an effective enterprise strategy involves compliance and risk management. Effective compliance, relative to regulatory and enterprise objectives and controls, results in more efficient execution of strategic goals.
There is a known drag on an organization that has recurring efforts in non-compliance and heavy-lift reporting. Once you clear the runway of any non-compliance or regulatory obstacles, an organization can move faster toward strategic objectives without drag or disruption.
Expect More and Tougher Insurance Regulations and Compliance Requirements
Regulation evolves as businesses change and the needs and demands of consumers press businesses to move from traditional operating methods.
Regulators respond to new risks within the industry with new regulations and reporting requirements. Companies are constantly balancing the need for an effective compliance program across the enterprise with risk-management controls and the resources needed to execute those controls effectively.
There have been efforts to automate controls within systems to allow for higher accuracy in execution, freeing up company employees to focus on more review and analysis. Still, there is only so much that can be truly automated. Knowledge and understanding of insurance regulations and the industry is key to executing a sound compliance strategy within an environment of evolving regulation.
Ultimately, companies in the insurance industry will find it challenging to keep up with the ever-changing demands of customers, boards, and regulators.
The Newest Threats in the Insurance Industry
The key to executing strategic goals involves constantly monitoring the challenges and risks that can interfere with progress, adjusting as needed to ensure continued risk mitigation. Consider current threats in the industry and assess the impact on existing enterprise plans and risk management.
These are some of the critical issues many insurance companies face – companies should identify and address other risks at a company-specific level:
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There’s a loss of knowledge within insurance organizations as employees move and retire. – The insurance industry is very specialized relative to regulation and reporting. It takes years to develop the knowledge to understand the requirements for sound execution fully. In addition, every company has a unique way of operating and managing its business model. Companies struggle to retain, train and hire employees to keep pace with the increasing regulatory demands.
The loss of experienced people increases the demands on current employees. – An individual only has so much bandwidth, especially when executing high-level tasks that involve specific and specialized insurance-industry knowledge. It is a constant battle for management. The easiest path assumes that the most knowledgeable employees would implement new regulations. Companies must acknowledge the risk of burning out existing staff by piling on more tasks revolving around regulations and business needs. Leadership faces the continual challenge of balancing team member bandwidth.
Many insurance companies stand on the sideline when beginning the inevitable technology transformation of systems and processes. – Granted, these complex technology transformations and upgrades require significant resources of time and money. These large-scale projects create many business and compliance risks. Success requires extensive preparation across the organization.
Cybersecurity poses an ongoing risk to the company’s data and reputation. – Predators work 24/7 to exploit weaknesses to breach company systems. These risks require constant monitoring. Compliance requires investing in resources to ensure risk mitigation meets regulatory requirements and business needs.
The Risks are Real
Companies face high costs when they get risk monitoring and mitigation wrong. Understanding risks and compliance requires an effective enterprise plan.
What’s at Stake?
- Financial: Actual losses and opportunity costs
- Reputation: The loss of trust and credibility from customers and investors
- Legal and regulatory: Risk impacts your compliance with legislation or regulation and could result in fines
- Operational: Risk could disrupt your operations
An Effective Risk and Compliance Monitoring Program
Addressing risk and compliance requires an investment in personnel and systems to ensure an effective compliance program that meets business objectives and maintains regulatory compliance and reporting.
Companies that understand and address risk and compliance often use outside resources to ensure effective monitoring and control of accounting, reporting, and regulatory compliance. Routine stress testing and execution oversight should be built into a comprehensive enterprise risk program.
Opportunities to Improve Risk Management
Creating robust compliance and risk programs requires adequate staffing and agile technology. When combined, these address the needs of the ever-shifting compliance landscape.
- Advanced analytics – Quickly identify deficiencies and failures in control processes using analytics customized to your business needs and compliance demands.
- Automated reporting – Staff spends less time creating evidence of monitoring and more time on high-level risk analysis and reviewing results.
- Staffing scope and coverage – Strengthening overall execution, monitoring, and reporting requires roles and responsibilities for managing risk and compliance review and overlapping in key risk areas.
At TAC4®, we have deep experience in the insurance industry to partner with your staff to ensure your risk and compliance programs are designed and executed to meet your business needs and objectives. Having a partner devoted to your success will effectively challenge your program to ensure execution is a win for your organization and will help move you to your strategic objectives.
Contact us to discuss how we can help you navigate risk and compliance.