22.2 Startup: Staffing and Scope

Critical: Scope and purpose needs to be be agreed upon by all key stakeholders at the start

  • Other decisions depends on this

  • Fail to do so will lead to backtracking on decisions later on and delay

Managing expectations is key

  • IRM has the potential to appear to be all things to all people

  • Different departments will think it will solve a myriad of problems for them

Staffing

  • Clear reporting lines for modeling team so direction can be followed

    • Solid vs dotted line (matrix) reporting

    • Multi function oversight committee

  • Key functions that need to be represented

    • U/w, planning, finance, actuarial, risk

  • Resource Commitment: Full time or part time (e.g. temporary for implementation and permanent for upkeep)

Inputs & Outputs

  • Needs good control similar to accounting figures, see integration section for further discussion

  • Templates that provide analysis could be locked down to prevent misuse

  • Input example: premium, loss, exposure

  • Output example: \(\sigma\) of LR or profits, \(VaR\) and \(TVaR\), correlations

Purpose, examples:

  • Quantify variation around the plan

  • Provide objective view on the distribution of company LoB results

Scope

  • Prospective u/w year only?

  • Or includes reserves, assets?

  • What about op risk?

  • Level of detail:

    • Low detail on whole company, or

    • High detail on a pilot segment

22.2.1 Recommendations

Imperative for the IRM team to report to a leader with a reputation for fairness and balance

  • The actual functional reporting line is less important

Resource commitment: think of IRM implementation of a new competency

  • Firm will need to hire or transfer employees for the new department

Need good controls over inputs and outputs similar (similar to that used with a ledger or reserving)

Define initial scope as clearly as possible