Risk challenge practice as indicator of risk culture in a South African life insurance organisation

Abstract

Regulated financial services organisations are required have in place risk functions that are not just gatekeepers but that also provide risk challenge when business decisions are made. This study explores the extent to which risk challenge is practised by operational risk managers in a South African life insurance organisation, with the purpose of assessing their experience of risk challenge and suggesting guidelines to improve the situation if necessary. A qualitative research approach was followed and a purposive sample of 13 participants was selected from the 35 risk practitioners employed by the organisation. Semi-structured interviews were conducted on the topic of risk challenge and its practice. During business decision-making, operational risk managers are required to have the courage to speak without the fear of being perceived as bringing too much challenge or being out of line with business objectives. Their experience depends on the maturity of the risk culture in an organisation, and in this case the extent to which raising issues of risk was not experienced as punitive. The results of this study clearly showed that the risk function, leadership and accountability, the consultation process, and information and communication in the organisation are necessary elements for maintaing or improving risk challenge practices. Inadequate ability by risk practitioners to deal with strong-minded leaders as well as lack of product knowledge in a complex environment may limit their application and practice of risk challenge, whereas strong regulatory guidance and ongoing review on their practices of risk challenge may assist them. This study is first in the insurance industry in South Africa to yield personal opinions of risk challenge among risk practitioners. The outcomes could be useful in the insurance field and also in other business environments where application of risk challenge appears to require review and improvement.