Practice of Risk Management: Organizational Requirements and International Risk
Governance and people
Risk management needs governance, not just technique. The board sets risk appetite and oversight; the chief risk officer or risk manager runs the framework; business units own their risks; internal audit gives independent assurance. Requirements include a written risk appetite statement, clear roles and authority limits, a risk committee, integrated reporting, incentive alignment, training, and a culture in which bad news travels upward. Embedding means risk registers, key risk indicators, and escalation are part of routine operations rather than an annual exercise. Performance is tracked with cost of risk, loss ratios, and progress against plan.
International and executive risk
Cross-border operations add political and country risk (expropriation, currency inconvertibility, political violence), regulatory and sanctions exposure, legal and cultural differences, and program design complexity. Multinational programs must respect locally admitted insurance requirements and compulsory covers; a common structure is a global master policy with local policies plus difference-in-conditions and difference-in-limits (DIC/DIL) coverage. Fronting uses a local insurer to issue an admitted policy, with the parent's captive or insurer reinsuring it. Non-admitted insurance can trigger penalties.
Traps
The risk manager does not own every risk - business units do. The board approves appetite; management executes. DIC responds to broader conditions, DIL to higher limits. Fronting does not transfer economic risk. Political risk is not identical to country risk. Sanctions screening is a compliance exposure, not merely a legal one.
Rule of thumb: a risk with no named owner and no escalation path is unmanaged, no matter how good the register looks.
Worked example: a manufacturer with plants in three countries buys local admitted policies for compulsory covers, a global master policy above them, DIC/DIL to close gaps, and political risk cover for expropriation at one site.