Carriers have struggled to accurately calculate their operational and financial risks. Getting to the heart of the matter is essential for long-term prosperity.The financial success or failure of a property & casualty carrier largely depends on the company's ability to manage risk. Based on sophisticated actuarial models, carriers can formulate a risk model for virtually every type of physical risk exposure, and through these assumptions decide whether the risk is worth bearing.
But physical risk, while at the heart of a carrier's due diligence, represents just a fraction of the overall risk to which the company is exposed. Other types of risk-predominantly ones that deal with financial and operational governance-lurk beneath the surface of Corporate America. Understanding the magnitude of such risks depends on effective corporate policymaking, but implementing this effectively is often the exception rather than the rule.
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