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Chris MandelMark Marshall
Al Rhodes
"Too Big Data: Managing the Avalanche of Captive Data
Speakers
❖Al Rhodes, President SIGMA Actuarial
❖Mark Marshall, Director Risk ManagementExtra Space Storage
❖Chris Mandel, SVP, Strategic Solutions, SedgwickDirector, Sedgwick Institute
Chris Mandel
Digital > Digital Risk > Big Data
Today’s agenda
➢ What is digital and the digitization of risk?
➢ What is big data and how can it be used?
➢ What are the various analytical methods?
➢ Using big data to enable captive performance
➢ Big data and robust analytics in action➢ A captive owner’s experience: Extra Space Storage
➢ An actuarial viewpoint: SIGMA Actuarial
➢ Key take-a-ways & questions
The Risk management framework: Data Dependent
Identify
Measure
Monitor
Manage
Report
Risk Management
DATA QUALITY ATTRIBUTES
✓ RELIABLE
✓ INTERPRETABLE
✓ ACTIONABLE
What is Digital?
Seven Building Blocks of Digital
•Data management. Overall data governance, data quality, consistency processes, and operating models • Process and work-flow automation. •Advanced analytics and decision automation..• Cohesive, timely, and flexible infrastructure.• Smart visualization and interfaces. • External ecosystem • Talent and culture.
SOURCE: McKINSEY AND Co
What is Digital Risk Management?• Focused on risk associated with digital business
processes
• A business issue; not just a technology issue
• Must be owned by management; not just IT
• Heavy reliance on the valuation of the business impact
• Enables leaders to understand their digital risk profile from a business perspective
• Should equip decision makers with knowledge and a balanced decision making framework (protect/operate)
What is a digital risk profile?
• Key technology affected risks vs all risks
• What matters most to whom driven by technology?
• Aligns KRIs with KPIs to organizational scorecards
• Who owns and is accountable for the risks?
• Connects relevant strategies with specific objectives
• The status of the digital control environment
• The status of targeted mitigation tactics
• Depicts digital trends and relevant changes
• Informed by risk professionals with an understanding of how technology is impacting exposures
Capacity Explosion
What is Digital Risk Management?
Where risk management would:
• capture and manage information from a broader and richer set of data
• automate processes it controls, and work with others to do the same for decision-heavy processes
• use advanced analytics to further improve the accuracy and consistency of its models
• embed its solutions in the organization’s websites, mobile apps, and its financial, product and process platforms
• enable leaders to consult self-serve dashboards informed by risk analyses
• review and reshape its mandate and role to capitalize on its ability to provide faster, more forward-looking, and deeper insights and advice to the organization
• ultimately alter the organizational setup, as well as its culture, talent, and ways of working The future of risk management in the digital era- December 2017 | Report McKinsey & Co.
More Digital Risk Issues
• Building digital resiliency
• Building risk leader skills to a mix of business acumen with better technical knowledge
• An emerging significant digital risk is created by business model disruption by competitors
• The higher multiple applied to firms that are more digitally enabled
Digitization Trends
➢Increasing speed of data availability even in real time
➢Increasing breadth and depth of exposure data quality
➢Declining cost of more robust tech tools
➢Reduced regulatory burden
➢Increasing data privacy challenges
➢More investment in data collection & analysis tools tied to the above;
➢Increasing transparency among risk stakeholders;
➢Increasing formation of alliances and coalitions among stakeholders
➢Ultimately, declining cost of risk in more traditional exposure areas and increasing cost of risk in emerging exposure areas
So then, what is big data?• Big data is a term for data sets that are so large or complex that
traditional data processing applications are inadequate
• Challenges of Big Data:
• Analysis
• Capture
• Data curation
• Search
• Sharing
• Storage
• Transfer
• Visualization
• Querying and
• Information privacy.
Big or actionable data?• Big data attributes
• Vast in scope
• Varied in form
• Instantaneous in velocity
• Migrated from mainframes to hand-helds
• Extracted from internal and external sources
• How can captive managers leverage it?• Using tools to integrate, manipulate and access structured and unstructured data
• Using advanced tools to enable predictive and prescriptive analytics and visualization
• Apply big data to the biggest, most complex risks
• Being able to integrate, manipulate and query BD to create/update risk profiles
• Feed simulation analysis
• Inform scenario analysis
Source: Big data as the key to better risk management, The Economist
The spectrum of analytical methods
Descriptive Predictive Prescriptive
WHAT HAPPENED? WHAT WILL HAPPEN? WHAT CAN WE DO ABOUT IT?
Examples of using big data
• Comparing loss trends across all organizations like yours
• Using predictive models to distinguish between legitimate and fraudulent claims
• Tracking claimant behavioral patterns across all like kind claims
• Analyzing employee traits and behaviors to uncover regulatory violations before they become findings or fines
• Assessing employee safety vulnerabilities across entire industries for benchmarking your organization’s similar exposure
• Analyzing investment portfolio performance against broad industry benchmarks
Using data effectively to tell your story:
Using data to design and deploy robust key metricsData enabled metrics can:
• reveal captive risks not efficiently financed or mitigated
• identify risk exposure levels, and detect changes or trends in existing risk exposures that could affect captive performance
• enable better management of captive risks by deploying the best prevention measures before incidents occur that can lead to losses
• can measure risk and volatility related to achieving captive performance objectives
• can be leveraged as leading (predictive) indicators enabling preemptive actions
• can provide objective, quantifiable information about captive risks and trends that can affect the captive strategy, plan and long term success
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Key questions for using data for better analytics
• What are the key risks based on your captive strategy, risk strategy and business model/strategy?
• Do we understand the root cause, impact, likelihood and potential velocity of risks covered by our captive?
• Are we using data effectively and efficiently in assessment of our captive risk & investment portfolios?
• What is the appetite within your company culture for robust analysis, appropriately resourcing it and deeply leveraging data to enable it?
• Are the results of our analyses actionable and being used to make better decisions?
• Are your leaders and stakeholders committed to the effective use of ART
• Is our ultimate goal of data analysis getting the right information to the right people at the right time?
Plan to knock down the challenges
Captive leaders should do use the latest tools and best practices to drive more robust analyses. In doing so prepare for these challenges:
Challenges:
1. Sourcing the skills/expertise needed for the right, most insightful analysis
2. Driving as much reporting as possible into actionable elements
3. Deciding what tools you should and can use to achieve captive goals
4. Aligning captive priorities to business priorities
5. Avoiding distraction toward the mundane vs impactful, and
6. Consistently producing high value analytical output
Simplifying the Big Data DiscussionDo you understand how digitization is
transforming your organization?
Does your team have the skills to analyze
your digital risk profile?
What are your top FIVE possible digital
loss scenarios/exposures?
Have you reviewed compliance results
against new regulatory requirements?
Can the captive address some or all of
these exposures?
Mark MarshallA Captive Owner’s Perspective
Extra Space Storage
• 1,606 Properties
• 872 Wholly Owned
• 227 Joint Venture
• 507 Managed
• Created a Captive in 2006
• Offer tenant insurance to customers
• Added other casualty lines
UNDERWATER STORAGEGREEN STORAGE
Bad Storage Ideas
4
More Bad Storage Ideas
DRIVE THRU STORAGE COLD STORAGE
3
Claims Happen
• Prevent
• Manage
• Review
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IS DATA GETTING IN THE WAY?
Avoiding information
overload
Remove the noise
surrounding your important
data
Drilling down to what
matters most
Use technology to
your advantage
GET TO WHAT REALLY
MATTERS
• Identify what executives really need to know
• Participants focused on the same information
• Set up your specific KPIs (Key Performance Indicators)
SPEAK THE SAME LANGUAGE
Risk managers - accountants - executives
Focus on desired
outcomes
Clarify needs and results
All working together
Data Results
• Used our data to respond to a regulatory rate inquiry • Saving millions of dollars
• Using data to prevent claims • Major savings
• Expanded coverages offered to customers• Products not offered• Increased customer experience
• Evaluated property insurance risk, continue to reassess • Ability to redeploy capital
• Keeping key stakeholders informed• Improved financial reporting, more satisfied stakeholders
Al Rhodes An Actuary’s Perspective
Too Much Data?
• There’s never too much data!!!
• However, it may be not focused on what matters
• Do not overuse minutiae• Confusing to stakeholders
• Do not underuse the big picture• Focus on the answer
• Drill down from there - maybe
Never Too Much Data!
• Capture all the loss data• The types of loss
• The locations (state, etc...)
• Capture all the exposure data• Payroll by class code
• Types of vehicles
• Stakeholders will not see all of this
Who is the Stakeholder?
• Risk Manager• Actionable data – medium/high
• Captive Manager• Actionable data – high
• CFO• Actionable data – low
• Regulator• Actionable data – low/medium
Minutiae / Big Picture
• Collect the data
• Use the data
• Strategically report the data
• Not every metric is useful• Use extra appendices if you feel a need to show everything
Key Take-a-ways
• Understand how digital is transforming exposures
• Upgrade your skills to be able to deal with digital risks & the big data that can help manage them
• Translate this paradigm shifting trend into your captive strategy
• Know what key datapoints each stakeholder needs
• Collect the data, but do not overwhelm with useless metrics
• Focus on the answer, provide details that build up to the answer
• Know your business needs and ask the right questions, to get to the right data
• Verify the data is working for your company, get the right answers not the answers you want
Speaker Information
• Al Rhodes, President
SIGMA Actuarial
• Mark Marshall, Director Risk Management
Extra Space Storage
• Chris Mandel, SVP, Strategic Solutions, Sedgwick
Director, Sedgwick Institute
