Strategic risk management practices by AAR Insurance Kenya Limited

Abstract

Strategic Risk Management is a process for identifying, assessing and managing risks and uncertainties, affected by internal and external events or scenarios that could inhibit an organization’s ability to achieve its strategy and strategic objectives. The ultimate goal of strategic risk management is creating and protecting shareholder and stakeholder value. This study focuses on an area that has not been expressly addressed by other studies namely; strategic risk management in the context of insurance provision. This study was designed to fill this gap using a case study of AAR insurance Kenya Limited. This study sought to answer pertinent questions which included: What are the unique risks facing AAR as a health insurance service provider? How does AAR cope with the risks? And which pragmatic strategies that can be used to mitigate the perceived risks at both the firm and industry levels? This study employed case study research design. This is because the study intends to obtain an in depth understanding on the strategic management practices of firms in the insurance companies. The target population comprised of 40 senior management and middle level staff at AAR Insurance Kenya Limited drawn from the department of finance, underwriting and operation. The study adopted stratified random sampling. The sample of 14 from a population of 40 forms 35.00% of the target population which fulfils the minimum threshold. The study used interview guide to collect the data. The interview guides were checked for completeness and consistency of information at the end of every field data collection day and before storage. Data was later subjected to statistical analysis using SPSS computer software. Data was analyzed thematically using content analysis. According to the respondents reputation is considered the most significant risk facing their company. Reputational risk is seen to be the result of poor claims payments practices, the collapse or insolvency of industry players, low profitability, inadequate customer handling processes and poorquality customer service, low contract certainty and a lack of proper complaints monitoring and handling processes. Based on the findings, external risk can arise at various stages, e.g., registration of clients, underwriting, reinsurance and the claims process. The severity of risk can range from a slight exaggeration to deliberately causing loss of insured assets. The study recommends that the Board should continue taking ownership and driving the risk agenda across the business. While senior management with support from the CRO/Head of audit are involved in managing risks, the oversight by the board cannot be delegated. It was also recommended that the organization should focus on new emerging risk types such as reputation, operational risks and IT security while not losing focus on the traditional risks such as credit and market risks. AAR should also define Risk Management framework and program which enables effective reporting and consolidation of data.