ORSA Considerations in a Changing World

The ORSA process looks at Current and Potential risks facing the company to both mitigate their impact and ensure sufficient capital to absorb possible shocks. It is a valuable exercise, feeding directly into the Risk Appetite process, and subsequently informing the company Strategy.

In a static world, the ORSA focus is primarily on the Current risk profile of the business; it is largely a quantification process, examining the interaction of known variables and stressing individual components to assess the risk impact.In the changing world of 2020, Potential risks come more strongly into focus when preparing the ORSA.

These include global risks to public health, the environment, and associated political and social trends. Among those for consideration in the 2020 ORSA are:

• Pandemic
  - Change in social behaviours leading to change in product need
  - Change in labour force make-up and behaviours
  - Economic recession
  - Investor behaviours and potential for investment market shocks
• Geopolitical
  - Brexit (deal / no deal)
  - Reversing globalisation or nationalisation
• Climate
  - Nat Cat exposures (impact and frequency)
  - Value shift from traditional (fossil based) industries
• Digital Crime
  - Cyber attacks
  - Influence of State actors

An ORSA reflecting on both the Current risk profile and the Potential risks in a changing world will inform positively the company’s risk mitigation plans and business strategies.

Seamus@GovernanceMatters.ie