Attached.

Outline: Principles of risk management and insurance
Thesis statement: Enterprise risk management is beneficial in reducing earnings plus stock price

instability; it increases efficiency in capital gain, reduces external capital expenses as well as
creates synergies amid many risk management processes.


Running head: RISK MANAGEMENT

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Principles of Risk Management and Insurance
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RISK MANAGEMENT

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Principles of Risk Management and Insurance
Researchers plus experts in the industry argue that risk management in enterprises is
essential for insurance companies for various reasons. Enterprise risk management is beneficial
in reducing earnings plus stock price instability; it increases efficiency in capital gain, reduces
external capital expenses as well as creates synergies amid many risk management processes.
Implementing enterprise risk management is not an easy task that will take place in a single day.
It is costly as well as time-consuming. The enterprise risk management theory says that
corporations with better risk management methods can efficiently manage their crisis.
These firms hence can minimize the effects of risks on the corporation's performance. For
example, organizations that have powerful enterprise risk management abilities might experience
reduced panic on the sale of their products because analysts and investors have confidence in
such corporations. Insufficient empirical proof on the value of risk management programs has
held back the implementation of enterprise risk management. Recent research has indicated the
value relevance of implementing risk management in organizations. In a study done by Hoyt &
Liebenberg (2003), they found a proof for a beneficial relationship between the organization
value and enterprise risk management. Hoyt and Liebenberg calculated the organization value by
applying Tobin’s Q formula. They discovered the significant fact statistically that corporations
which used enterprise risk management have more organization value as compared to those that
have not engaged themselves in enterprise risk management.
Problem Statement
Over the last many years, more rules have been established for insurance companies. The
Solvency 11 Directive has been developed for the last decades and in effect. The question that
needs an answer is that if the rules regarding the management of risks are enough to hinder

RISK MANAGEMENT

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challenges from occurring. There lacks proof that the execution of enterprise risk management
causes improved performance. Because of lack of evidence for this matter, extensive research in
needed to analyze the connection between enterprise risk management execution and firm
performance when facing a financial problem. The existing framework of enterprise risk
management includes the principles on reporting as well as compliance. When firms are
executing this risk management framework, they will consider compliance and reporting
objectives. In the Solvency 11 Directive, c...