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Written by Li-May Chew, Associate Director, IDC Financial Insights. Li-May can be contacted at

I have previously blogged on how operational pressures are nudging typically siloed risk and finance fractions at insurers to think more earnestly about creating shared priorities and enhancing partnerships to improve strategic decision making. This piece further expands upon those commentaries on Europe and U.S., but with a keener focus on the Latin American (LATAM) insurance market.

Our conversations indicate that the Brazilian and Mexican insurers are feeling the strongest pressures and keenest need for risk-finance collaborations vis-à-vis global peers. These regional insurers are getting their risk and finance teams to collaborate to reap benefits from shared business analytics and valuation engines that can enhance decision making for reporting, planning, and capital management. Furthermore, given that operating off common data sets would simplify operations and enhance control over data quality, accuracy, completeness and timeliness, they are also integrating risk with finance to reduce complexities and manage expenses.

When it comes to the extent of progress, insurers from Brazil and Mexico appear to have advanced the most with their integration programs given that 58% have consolidated risk with finance versus 48% globally (with almost a-third of these 58% in LATAM being satisfied with the extent of their implementation), another 32% being at advanced stages of planning, and 10% having at least started some sort of planning program.

While there are undoubted benefits from interdepartmental integration, incorporating risk-based data into financial and performance management obviously engenders obstacles. The principal concern for LATAM insurers stems from a divergence in the way these two groups might define similar terms and measure divisional performance. Data would be defined and accessed differently due to the varying perspectivebetween risk and finance, their information requirements, and tabulation methods. Ranking almost as critical is the lack of experienced personnel, and difference in perspectives and cultures between their finance and risk fractions - with both equally cautious of integrating for fear of ceding autonomy to the other.

Technological concerns also evoked great concerns amongst the LATAM respondents, with robustness of data being most crucial when it comes to providing the momentum for, or conversely stalling, integration projects. Another IT challenge centers round limitations from existing legacy technologies such as lack of scalability or interoperability of systems restricting risk-finance implementation.

To alleviate risk-finance coordination, insurers in LATAM see investments in enterprise business intelligence and analytics strategy nudging them towards deeper inter-departmental collaborations, alongside the sharing and joint development of common data warehouses and modeling competencies. Market leaders are also widening their competitive advantage by capitalizing on innovations such as enterprise information management to centralize data modeling and flow management, data visualization capabilities and unified data platforms.

As LATAM insurers continue to make inroads in consolidating their risk and finance divisions, they need to enhance this partnership by having a clear vision of what the joint responsibilities between both divisions are, while still preserving the independence of both. It would further serve them well to engage vendors with a comprehensive, yet integrated risk-finance data platform that can help establish shared data processes and management systems to reduce total cost of ownership.

Download a copy of the IDC Financial Insights' White Paper: Risk-Finance Collaboration at Global Insurers: A Partnership in Transition.