7. Risk management aims for 2012

7.1. Internal monitoring system

The implementation of a Group-wide internal control system is a major project for the risk management process in 2012. The objective of an internal control system is to secure efficient process workflows, as well as availability and reliability in financial and non-financial reporting.

In addition to prudential requirements, the UNIQA Group places a particularly high value on transparent and efficient processes, which are a prerequisite for attaining the strategic goals defined in the course of the UNIQA Group’s reorientation.

The ICS guidelines, which were adopted at both the Group and company level, define the minimum requirements of an internal control system in terms of methods and scope. Central elements of these guidelines are in accordance with the framework that was developed by COSO (“Committee of Sponsoring Organizations of the Treadway Commission”).

The ICS guidelines stipulate that the internal control system must be implemented for the following core processes (and their sub-processes):

  • Accounting
  • Asset management
  • Product development
  • Collection / disbursement
  • Underwriting
  • Processing of claims
  • Risk management process

The objective is to recognise in a timely manner risks that can occur during a process and prevent them. After the risk identification phase, key controls should be defined for all major risks, and these controls should reduce or eliminate risks. In addition to accounting processes, in which we want to minimise the risk of errors in the consolidated statements by means of appropriate controls, we also place great emphasis on error-free process procedures from the core business.

Our goal for 2012 is to document the most important elements of the internal control system, such as process flows, identified risks and controls, across the Group and in a uniform manner. Furthermore, our ICS system is audited each year and adjusted as necessary.

Description of the most important features of the internal control system (ICS) with regard to the accounting process according to Section 243a paragraph 2 of the Austrian Commercial Code

In terms of accounting processes, an ICS process has been defined and in operation since 2009. The accounting process of the UNIQA Group is standardised throughout the Group. Compliance guidelines, operational organisation manuals, balance sheet and consolidation manuals exist to ensure a reliable process. Processing is largely centralised for domestic affiliated companies. For international Group companies, the accounting process is largely decentralised.

The goal of the accounting process internal control system is to implement controls to ensure that a proper report can be reliably produced despite the identified risks. In addition to the risks described in the risk report, the RMS also deals with additional risks as well as those in operational processes, compliance, internal reporting, etc.

Organisational structure and controlling scope

The accounting process of the UNIQA Group is standardised throughout the Group. Compliance guidelines, operational organisation manuals, balance sheet and consolidation manuals exist to ensure a reliable process. Processing is largely centralised for domestic affiliated companies. For international Group companies, the accounting process is largely decentralised.

Identification and controlling of risks

An inventory of the existing risks was taken and appropriate monitoring measures were defined for the identification of existing risks. The most important checks were defined in guidelines and instructions and coupled with an authorisation concept. The checks cover both manual coordination and reconciliation routines as well as acceptance inspections of system configurations for connected IT systems. Identified risks and weak points in monitoring the accounting process are reported quickly to management so that corrective measures can be taken. The procedure for identifying and monitoring the risks is regularly evaluated by an independent, external consultant.

7.2 ALM

UNIQA strives, in the context of an existing ALM process, for adequate duration matching between assets and liabilities. A major further development of existing ALM processes should take place in 2012 in the course of establishing the risk management department, and market and credit risk management in particular. A project is deriving strategic asset allocation tailored to fit the business model from given technical requirements, while also creating the necessary organisational structures and conditions for a functioning, interdepartmental ALM process. The ALM project includes strategically important topics such as the allocation of risk capital to individual risk types, the different structural conditions for deriving strategic asset allocation, comprehensive further development of existing limit and threshold systems, a Group-wide concept for efficient liquidity management, nominating rights for an ALM committee for the topics of profit sharing in the life insurance line and the development of new products, as well as the organisation and structural conditions of the ALM committee itself. ALM is an essential tool for UNIQA for providing the core business with efficient support by means of asset management. In the future, the focus on sustainability and economic risk/return assessments will become even more important with the introduction of Solvency II. In the context of this project, UNIQA wants to establish a state-of-the-art ALM process, thereby ensuring maximum benefits for policyholders, shareholders and other stakeholders.

7.3 Value-based management

On 1 January 2012, a new area called “value-based management” was established within the risk management department. The core task of this area is to support the company over the long term to make the greatest possible progress towards defined company goals. These goals include not only target profits, but also topics such as regulatory and economic equity and the Group’s rating.

Managing the company should be guided by the assessment of value creation by means of value-oriented key figures, whereby the relation of profits and risks form the core of new analytical methods.

This area will also be responsible for developing national economic themes. The focus here is on the analysis of the insurance markets in individual countries in Central and Southern Europe, as well as the expansion of the forecast model.

The area also covers the topics of compliance, code of conduct rules and sustainability. In order to protect the high reputation of the UNIQA brand, measures and existing processes for the prevention of money laundering, insider trading, corruption, theft and data protection will be expanded in the coming months.

7.4 ORSA (Own Risk and Solvency Assessment)

One focus in 2012 is the further development of the ORSA process. In addition to preparing internal guidelines, our focus is on addressing the entanglement of existing elements in the risk management framework.

Along with the internal evaluation of the risk situation in terms of risk sources and the evaluation of these risks, structured and strategic risk scenario development plays a central role here, as do the resulting implications on medium-term solvency, equity and profit positions.

7.5 Sustainability

We understand sustainable action as a major factor for our long-term economic success. This is why we were the first Austrian insurer to introduce the concept of “value-oriented company management” at Management Board level in a risk management department in the summer of 2011. For UNIQA, sustainability means working within a clear, transparent system of governance that assumes responsibility for three areas: the economy, society and the environment.

Our objective is to implement sustainability comprehensively in our strategy and business model. However – and we say this quite openly – we are not yet where want to be. In the next 12 months, we will begin anchoring risk and values management in the company. This means sustainability is linked with the strategy and is integrated into processes and systems. Responsibility and values management exists. Compliance rules not only meet legal requirements, but are also an important component of the company culture. The topic of sustainability is treated in an active and structured manner.