Risk management is an integral component of prudential management and good corporate governance. It represents a modern approach to business management under a competitive market environment in which businesses and technology are constantly evolving. This dynamism creates risks which may hinder the company in achieving its business objectives.
Muang Thai Life Assurance PCL. (MTL) recognizes the importance of an effective risk management system. The company has established a well-defined governance structure to manage the risk of the company in accordance with international practices to best protect the interest of all stakeholders. The risk management activities aim to promote risk awareness throughout the organization and to enhance our capabilities to manage risk effectively; allowing the company to achieve its objectives in line with its mission and vision.
1. Strategic Risk
Strategic risk is the risk that arises from (1) the consequent of choosing to execute a particular strategy and (2) the failure associated with the strategy implementation. According to MTL Risk Taxonomy, strategic risks can be classified into corporate planning risk and strategic implementation risk.
2. Operational Risk
Operational Risk is the risk of loss resulting from failed, inadequate or inappropriate internal processes, people, systems and/or external events which impact to company operation or financial statement. This definition excludes strategic and reputational risk.
Operational risk includes information technology risk which refers to risks that may arise from use of IT in business which may have an impact on the Company’s systems or operations, which include risks arising from cyber threats
3. Insurance Risk
Insurance risk is the risk from fluctuation of claim frequency, claim severity or time of claim occurrence that deviate from the pricing and reserving assumptions. Key assumptions include mortality rate, lapse rate, expenses and interest rate.
4. Investment Risk
Investment risk comprises of market risk, credit risk, and liquidity risk.
Company also recognized the importance of asset-liability management (ALM), which the Investment risk and insurance risk are defined as risks related to ALM.
Moreover, there is reputation risk which is the risk that public recognize negative image or lost confidence of the company and may affect to company’s revenue and/or company’s capital in present and future. Reputation risk may arise as a result of occurrence of the risks mentioned above.
The company also considers significant changes from both internal and external environment that leads to emerging risk which is the risk that have not occurred before or company may not experience it. Thus, it is difficult to assess the possibility and impact of the emerging risks.