Black Diamond Risk Enterprises (BDRE) provides a broad variety of strategic risk services. Strategic risk refers to the risk of significant investments for which there is uncertainty about success and profitability.
Strategic risk management in non-financial sectors is often characterized by executive sponsorship, board oversight and includes (among other things) alternative risk financing, indexing of risk and the optimized use of technology.
Black Diamond Strategic Risk Services Include:
Active Portfolio Management
Black Diamond Risk Enterprises (BDRE) works with firms to develop superior Active Portfolio Management strategies especially with respect to strategic decisions. The strategic decision to enter or exit a particular business should include capital and liquidity management considerations, as well as risk-adjusted performance measurement and the “risk diversification effect” of the decision.
Capital management decisions seek an answer to the question, “How much value will be created if the decision is taken to allocate resources to a new or existing business, or alternatively to close down an activity?”
Black Diamond Risk Enterprises (BDRE) provides capital management consulting services. As a trend, Enterprise Risk Management is clearly in tune with a parallel drive toward the unification of risk, capital, and balance sheet management. Over the last few years, it has become increasingly difficult to distinguish risk management tools from capital management tools since risk increasingly drives the allocation of capital in risk-intensive businesses such as banking and insurance. Similarly, it has become difficult to distinguish capital management tools from balance sheet management tools, since risk/reward relationships increasingly drive the structure of the balance sheet.
At BDRE we believe that only by forging a meaningful connection between risk measurement, risk capital, risk-based pricing and performance measurement can firms ensure that the decisions they take reflect the best interests of stakeholders.
- Risk Capital is the cushion that provides protection against the various risks inherent in a corporation’s business. It traditionally answers the question “How much capital is required for our firm to remain solvent given our risk profile?” Risk Capital measurement is based on the same concepts as Value-at-Risk (VaR) calculation methodology.
- Risk Capital Attribution involves the allocating of risk capital to business lines as part of a risk-adjusted performance measurement system.
- Economic Capital is the sum of risk capital and strategic capital where strategic risk capital = goodwill + burned out capital.
- Strategic Risk Capital refers to the risk of significant investments about whose success and profitability there is a high uncertainty. If the venture is not successful, the firm will usually face a major write-off, and its reputation will be damaged.
- Regulatory Capital is the minimum amount of capital imposed by a regulator. (Reference Basel II & III and Solvency II.)
- Pricing Transactions – Risk capital numbers can be used to calculate risk-based pricing for individual transactions. Risk-based pricing is attractive because it ensures that a firm is compensated for the economic risk generated by a transaction.
Capital Management is a part of the following services:
Captive Management Services
Black Diamond Risk Enterprises (BDRE) consults with both single parent and group captives on feasibility and the on-going strategy and operation of the captive. We work directly with captive owners or in partnership with service providers to captives. We also provide business consulting to vendors servicing the captive Insurance industry. Services provided include:
A. Feasibility and pre-feasibility reviews
We evaluate individual and group insurance programs to determine the benefits of using a captive insurance company to fund the risk. Our evaluations start with a simple pre-feasibility assessment which can identify many of the key issues involved in the captive decision. From there we conduct full feasibility studies, including the implementation of a captive if appropriate. Our implementation services include domicile selection, application filing and vendor selection.
B. Captive strategy
Many established captives have outgrown their original missions and are challenged to continue to add value to their owners. We perform strategic reviews which examine the stages of the captive’s lifecycle and develop appropriate objectives for the company going forward. Strategic reviews can be used to evaluate expansion, potential closure or merging of the captive as well as initiating a significant re-structuring such as a change in domicile.
C. Communication and reporting
We develop communication programs to ensure that concise and meaningful information is made available to the owners allowing them to manage their participation in the captive. This includes designing reports that stimulate loss control activities and educating the owners on the key accounting characteristics of the captive.
D. Organizational and resourcing studies
We design the administrative processes of the captive to minimize the expenses of operating the captive. Our group captive services include the facilitation of the group, including the sharing of best practices among the members. We also evaluate the need for internal staffing and assist in the selection of service providers to the captive.
E. Technology services
We use web-based technology to aid in the operation of the captive. We develop and administer extranets for captives providing functionality to hold a central repository of key documents, manage and exchange data on the program and manage tasks across organizational boundaries.
F. Educational Programs
We design, manage and deliver in-person and web-based training programs on captives. Courses are custom designed in response to client needs. They are typically used to educate sales teams on captives and the latest developments in the captive insurance industry.
Black Diamond Risk Enterprises (BDRE) Captive Consulting services are provided in partnership with Newport Risk Services. NRS was founded in 2005 by Andrew Berry and draws on his expertise gained in the Insurance and risk management industries over the past twenty years.
Mr. Berry’s expertise includes:
- Nine years risk management consulting experience gained with Tillinghast – Towers Perrin, including work in both the European and US markets and being part of the team which developed Tillinghast’s enterprise risk management consulting practice.
- Technology experience gained as founder and President of Global Risk Exchange (GRX), an award winning exchange and technology company. GRX was designed to improve the efficiency of the insurance industry by increasing the electronic movement of data between and within different parties involved in an insurance program.
- Captive consulting experience gained with Strategic Risk Solutions, an independent captive management and consulting firm
- Operational and marketing experience gained with both GRX and Strategic Risk Solutions, including the implementation and management of the company’s marketing program.
- Business, finance and entrepreneurial education gained in the UK and at Babson College, whose MBA program is recognized as the leader for entrepreneurial studies.
Captive Management is a part of the following services:
Black Diamond Risk Enterprises (BDRE) works with firms to define and manage emerging risk related to:
A. Major losses from unmanaged supply chains
B. Model Risk in illiquid and extreme markets
C. Global Infrastructure contagion effects
D. Climate Change / Severe Weather
E. Reputation risks caused by outsourcing operations to poorly regulated markets
F. Ideological conflicts giving rise to security exposures
G. Inefficient markets and regulatory models
H. Volatility in the supply of natural resources
I. Abandonment of traditional insurance structures, players and capacity
J. Increasingly severe catastrophe losses due to increased coastal housing, commercial density & shifting demographics.
K. Cyber Risk
Emerging Risks is a part of the following services:
Black Diamond Risk Enterprises (BDRE) helps institutions upgrade their approach to managing Liquidity risk. Liquidity risk comprises both funding liquidity risk and asset liquidity risk, although these two dimensions of liquidity risk are closely related.
Funding liquidity risk relates to a firms ability to raise the necessary cash to roll over its debt; to meet the cash, margin and collateral requirements of counterparties; and (in the case of funds) to satisfy withdrawals.
Asset liquidity risk, often simply called liquidity risk, is the risk that an institution will not be able to execute a transaction at the prevailing market price because there is, temporarily, no appetite for the deal on the other side of the market. If the transaction cannot be postponed, its execution may lead to a substantial loss on the position.
Liquidity Management is a part of the following services:
Mergers & Acquisitions (M&A) Due Diligence
Black Diamond Risk Enterprises (BDRE) provides Mergers & Acquisition consulting services including performing due diligence, structuring & valuing deals and integrating corporate processes and cultures. Our consultants provide organizations of all sizes with the tools, knowledge and experience they need to effectively and efficiently perform M&A due diligence.
Mergers and Acquisitions (M&A) is a part of the following services:
Performance Measurement and Incentive Compensation
Black Diamond Risk Enterprises (BDRE) works with firms to implement sophisticated performance measurement systems. Once risk capital has been calculated it can be plugged into risk-based capital attribution systems, often grouped under the acronyms RAPM (Risk Adjusted Performance Measurement), or RAROC (Risk Adjusted Return on Capital).
RAROC numbers can be used as input in compensation calculations for senior management of business lines and/or operational groups for their contribution to shareholder value.
These systems provide a uniform risk-adjusted measure of performance that both management and external stakeholders can use to determine economic profitability (as opposed to accounting profitability).
Performance Measurements & Compensation is a part of the following services:
Subject Matter Expertise / Testimony
Black Diamond Risk Enterprises (BDRE) provides expert testimony in a variety of risk related areas. BDRE professionals are experienced, credentialed, articulate industry veterans who are passionate about the business of risk.