The authors state that managing a company’s risk portfolio in this manner can make it possible for a company to generate higher returns on their equity and use capital far more efficiently. These concepts have allowed the evolution of the current corporate approach to risk management in which companies are able to identify and focus on risks for which they have a competitive advantage using their knowledge of the value of different risks. The second change was the development of models that were able to put a value on risk transfer, changing how companies could buy, sell, and understand risk. The first of these changes occurred when companies’ focus shifted from owning the most profitable or fastest-growing businesses to owning those in which they had a competitive advantage.
The report, authored by Kevin Buehler, Andrew Freeman, and Ron Hulme, shows there is a current movement occurring in the corporate approach to risk management that stems from changes in business in the 1970s.
