Complex risk assessment

Market and credit risks are only two components of enterprise risk management. Companies also need to consider strategic and operational risks, which can be far more elusive—and equally adverse. These non-financial risks often involve interactions among people, systems, and the external environment, making them much harder to quantify. Some examples include the risk of fraud, business discontinuity, or major systems failures.

Milliman has developed a proprietary methodology to help companies identify and manage potential threats and opportunities and understand their risk profiles relative to corporate objectives. This methodology gives clients a more sophisticated understanding of their full risk profiles, improving their abilities to manage their greatest challenges.

Known as CRisALIS™—Complexity-based Risk Analysis—this structured and repeatable process enables companies to unravel the complex interrelationship of risks across their business, and provides an early warning system for emerging risks.

CRisALIS combines methods used in engineering and behavioural science to build a detailed cognitive map of potential weaknesses and problems within an organisation and provides tools to help monitor and manage them. By using both in-person interviews with company staff and mathematical data analysis, CRisALIS offers a more in-depth picture of enterprise-level risk.

CRisALIS analysis drives ratings upgrade

A major insurer needed a reliable method for calculating operational and strategic risks to demonstrate to ratings agencies it had adequate capital under all plausible foreseeable conditions.

Milliman used the CRisALIS methodology to assess the overall enterprise-level risk exposure, identifying the key risk factors and showing how to construct tangible scenarios for these difficult risks. The methodology yielded a repeatable process for future years that would incorporate new business and created an audit trail for the data. In this case, the company's in-depth research and thorough documentation convinced the agency to award the insurer a rating upgrade.