| Abstract: | Enterprise risk management is a process affected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, manage risk to be within its risk appetite and to provide reasonable assurance regarding the achievement of entity objectives. Regarding insurance companies operation there are inherent and significant risks which affect their performance. As an objective all insurance companies require effective and efficient performance to provide competent, consistent and quality insurance services. To achieve this objective insurance company need to have proper enterprise level risk management practices which mitigate possible risks and ensure their sustainability in the sector through maintaining to increase shareholder’s value, companies’ profitability and insurance sector growth. The objective of this study is to assess and identify the major strengths and weakness of insurance companies own enterprise level risk management practices and to forward some remedial recommendation to strengthen their effort on their functions. In order to collect the required data, the study used both primary and secondary data sources. Mainly the primary data is collected using questionnaires formulated and it was also used interview technique with insurance company’s risk management unit/department managers to collect additional data. Moreover, the study used document survey to prepare literature and to analyze the findings. To make the study effective and complete, the researcher is used census and convenient sampling techniques. With these techniques 17 insurance companies and 119 management and senior officers were taken as sample. The study identified that there are some positive steps so far taken by insurance companies to strengthen their risk management practices. These include board’s members are aware of risk management requirements expected from them by the NBE, in most companies risk management is delegated and relatively qualified personnel’s are assigned, existence of risk management policies and procedures. On the other hand, the study observed a number of risk management weaknesses. Significant proportion of insurance companies’ lack consideration of risk management as an essential component to their business, great effort is made for insurance risks other than relevant risks, strategy and program for risk management functions, internal capacity building, up-to-date and relevant data for informed decisions making and monitoring and evaluation. In addition to the above, companies also has limitations on integration with HR management and policies, capability to optimize the full benefits of risk management functions, and benchmarking experience, documented business continuity/contingency plans, companies failed to test risk management tools, relevant risks will future risks and lack of commitment from management and board as well as shortage of recourses are the main problems for risk management functions. Based on the above conclusion drawn, some recommendations are forwarded by the study. These includes that insurance companies should work hard to give great value and focus to the development of risk management functions awareness, build their internal capacity in relation to risk management functions to achieve the objectives of risk management, risk management units functions has to be monitored and evaluated regularly, HR management and policies has to be integrated with risk management units and NBE should review the existing risk management guidelines within the context of insurance companies’ capacity and evaluate their effectiveness. |
