Total Cost of Risk (TCOR) – Is Your Architecture Up to Date?

Enterprise Risk Management (ERM) cost programs have evolved beyond traditional TCOR analyses and ongoing management. Do you employ the most modern methods and techniques to keep the management team and board of directors apprised of the cost of risks matching individual profiles that are self-insured, insured and uninsured?

The architecture, construction and maintenance of a modern ERM TCOR financial picture is difficult to design and manage. Some financial and operational executives in our recent survey would say it’s nearly impossible. However, most boards and executive teams want to know how risks are being identified and managed, along with the associated costs of the programs. With increased emphasis on more strategic risk management, modern TCOR analyses are being designed, constructed and managed with a variety of underlying architectures. Each risk profile is identified, then appropriate standards, measurements and tools are being designed to support the management of the risks, including costs. The integration is imperative, whether it is being done in “real time” or statically. Noted below are some considerations for your TCOR architecture.

1. Have you identified all of your Risk Profiles?

The value and benefits of building and developing risk profiles are numerous. Organizing them into measurable components with summary reports and statistics will provide management and board members with snapshots of how each area of risk management is functioning.

2. Are there specific operations, underwriting or claim data which provide risk “flags”?

During the analysis and measurement phases of risk profile development, normally there are certain areas of risk causation or conditions which provide insights into patterns of probable loss frequency or severity. Have these causes and conditions been identified, and are they systematically captured to provide real time or static updates?

3. Are your risk management systems integrated, or are there sufficient “dashboards” for review of Risk Profiles?

As with any key area of an enterprise, systems are essential to monitor and support the operations. For example, most mid-sized to large organizations invest in a robust Customer Relationship Management (CRM) to manage the practices, strategies and technologies of customer interactions and data throughout the customer lifecycle. Typically, there is no hesitation to invest millions of dollars to keep modern infrastructures and reporting available to enhance customer relationships.

It is also equally important to consider investing in the Enterprise Risk Management systems to provide critical information about the risk profiles in each area of the business to maintain organizational security and stability. It may cost several thousands (vs. millions) of dollars to have a responsive ERM system if the architecture and reporting are designed to reflect the key risk variables and results. The ROI for these projects are often 10 times the investment, or more. To learn more about key risk management design considerations for your ERM or TCOR programs, please contact us. 

By Robert J. Blackburn, Managing Principal, Blackburn Group, Inc., contact him at This email address is being protected from spambots. You need JavaScript enabled to view it..