Fundamentals of Risk Management

Risk strategy
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that research costs are shared and technology battles are avoided. However, the
disadvantage is that the scope for a huge future competitive advantage is reduced.
Regulatory risks
One of the most difficult risk issues for many organizations is regulatory risk. A key 
component of the COSO framework is the achievement of compliance by the organ-
ization. Compliance may appear to be a relatively straightforward issue, but there 
are often complexities associated with the potential for changes to regulations, 
changes in the regulatory environment and different regulatory requirements in
different territories.
Different societies have different and changing views of certain commercial sectors. 
For example, the sex industry has different standards and different regulatory frame-
works in different parts of the world. Also, gambling faces different public attitudes, 
different regulatory frameworks and variable restrictions on activities in different 
countries. Ensuring regulatory compliance and maintaining good working relation-
ships with regulators can be difficult, especially when public opinion is changing 
and/or regulatory frameworks are being developed or modified.
There has been a great deal of consideration recently of the difficulties associated 
with ensuring compliance in the purchase and delivery of multinational or global 
insurance programmes. Two major issues have received considerable attention. 
These are the payment of insurance premium tax in different territories and the
acceptability of insurance provided in a country by an insurance company that has 
no presence in that territory. (Insurance written by an insurance company with no 
presence in a territory is referred to as non-admitted insurance.)
In relation to global insurance policies, the problems arise when a global policy
is issued by a large company based in one specific country, but with the insurance 
coverage applying across all the operations of the organization and in several different 
countries. Each country will have its regulations regarding the payment of insurance 
premium tax on that part of the insurance premium that relates to the operations of 
the organization in that country. Also, many territories in the world do not allow 
non-admitted insurance policies.
The range of risk control options available to organizations seeking to achieve 
compliance is, of course, restricted. Compliance is a basic requirement of all busi-
ness and commercial activities. Ensuring compliance may require cooperation with 
third parties and detailed advice from specialists with expertise in the discipline in 
that part of the world. In the example of insurance, it may be necessary for a local 
insurance company to be involved in the insurance programme in territories where 
non- admitted insurance is not allowed, and this will add cost to the insurance pro-
grammes. Also, arrangements for the payment of insurance premium tax may need 
to be made through third-party fiscal representatives within the territory where the 
taxes are due.

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