Digital and technological advances have created a broad spectrum of societal benefits and amplified the associated risks. As a result, organisations are realigning their operations, forging new third-party relationships, and putting data at the heart of their decision-mak- ing and analysis. This is happening rapidly and in an increasingly hostile cyber threat landscape. Therefore,
to succeed, organisations need to assess and under- stand the risks inherent in this changing environment and ensure the appropriate management.
Regularly, Malath assesses and monitors exposure to defined information securi- ty and cyber risk scenarios through key risk indicators to focus on actions and ade- quate resource allocation effectively. Malath is pursu- ing strategies that include IT legacy systems transformation and digitalization, such as de- veloping a self-serving device.
As a result, the Company may be exposed to technological risks until the newly implement- ed systems are available. In managing technological risks, Malath sets its safety stan- dards for planning, developing, operating, and using computer systems; conducts related com- pliance checks; and provides systematic instruction and guid- ance on appropriate usage.
Risk Management
(continued)Malath has also imple- mented various multi-lay- ered security measures to deal with potential defects, faulty computer system operations, and illicit use.
In addition, the Company has put measures in place to counter cyberattacks and related issues.
It is continually working to strengthen these with multi-layered protection and detection measures, thor- ough education and training on information security for all executives and employees, cooperation with external ex- pert organisations, promotion of security countermeasures, and others.
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To address the reinsur- ance credit risks, the Company adopted the following:
⚙ Properly setting self-re- tained risk limits through an effective reinsurance management system, and using reinsurance to trans- fer risks to reinsurers with a high level of solvency;
⚙ Reviewing the relevant information of a reinsurer in the reinsurance registration system in strict compliance with the regulatory require- ments prior to the execution of a reinsurance contract;
⚙ Conducting credit assess- ment on reinsurers through internal rating to select reinsurers that have the higher credit standing to mitigate credit risks.
Risk Management
(continued)HR Risk
HR risks occur due to the human resource cycle during selection, employee manage- ment, and dismissal. HR risk management focuses on the specific risks employees pose to the business. This could involve:
⚙ Limited experience
⚙ Unethical behaviour
⚙ Rotating employees, espe- cially leadership positions
⚙ Lack of succession planning
⚙ Inflated labour cost
⚙ Conflict of interest The HR department has many responsibilities, in- cluding identifying staffing needs, organisational devel- opment, recruiting, hiring, onboarding, training, reten- tion, and ensuring a positive employee experience.
Relationship
Management Risk
Customer relationship man- agement risk refers to the absence of CRM software or a precarious implementation of such a tool in a Company.
CRM is a catalyst in the insur- ance industry growth.
To mitigate the relation man- agement risk, Malath has a CRM system that engages solid business relationships to meet customer demands for better results.
The Company’s CRM technol- ogy is used to qualify leads, streamline various work func- tions, satisfy consumers and increase profits.
Alleviating risk, meeting diver- sity needs, improving financial challenges and employee operations are some of the successes that relationship management risk has brought to the Company.
Sales & Marketing Risk
Sales and marketing risks are the potentials for losses and failures of marketing.
This includes risks related to pricing, product develop- ment, promotion, distribution, branding, customer expe- rience, and sales. Sales risk may result in sales failures, and it can significantly affect the financial performance of the Company.
To understand and create better sales & marketing risk management, the Com- pany carries out the follow- ing activities:
⚙ Usage of clean data;
⚙ Cross-functional alignment;
⚙ Review of performance management;
⚙ Ongoing education.
Claims Management Risk
Claims management risks may arise within the Compa- ny in the event of inaccurate or incomplete case reserves and claims settlements, poor service quality, or excessive claims handling costs.
For effective claims manage- ment risk, Malath adopted the following best practices:
⚙ Developing a clear un- derstanding of the cus- tomer to set the claims review objective.
⚙ Fully understanding and accounting for the impact of claims on the insur- ance program.
⚙ Choosing claims for review according to objectives.
Reinsurance Risk
Reinsurance risks refer to the risk that may be faced by the Company in connection with the obligations to be under- taken by reinsurers due to their failure to perform rein- surance contracts.
Pricing Risk
Pricing risk is the risk resulting from the process by which the Company attempts to determine the appropriate premium price. Hence, the company ensures that com- petitive risk is provided. Risk exposure in this category includes the following:
⚙ Offering high prices com- pared to other types of insurance.
⚙ The ability of the Company to offer reduced rates due to internal efficiency.
Underwriting Policy Risk
Insurance underwriting risk can give rise to losses when such factors as economic conditions, the incidence of insured events, investment results and opera- tional expenses do not match the predictions made when premiums were set.
An insurance company must fulfil its responsibility to bear the risk it assumes on behalf of customers for long periods extending over many decades.
This requires the setting of reasonable premium rates that enable the stable pay-
ment of insurance claims and an appropriate level of risk control for upholding its cover- age responsibilities based on examination and assessment of the various conditions of the insured at the time of insur- ance underwriting.
Anti-money Laundry &
Terrorism Funding Risk
The company is aware that the insurance sector is exposed to money laundering and terrorism funding by different insurance processes, which requires the development of policies and applications re- garding the acceptance of any client and the due procedures stipulated in the related regu- lations. As such, the company has established an internal electronic system to follow up the regulatory requirements.
Regulatory Require- ments & Legal Risks
Insurance processes conducted by the company are subjected to supervision and control by the Saudi Central Bank (SAMA) through the cooperative insur- ance control law and regula- tion and the Council of Health Insurance (CCHI) executive regulation regarding health insurance products.
These regulations not only re- quire obtaining approvals and monitoring activities but also impose some restrictions such as capital adequacy to reduce the risks of deficit and bank- ruptcy by insurance companies and to enable them to pay their unforeseen liabilities when they arise.
Generally, regulation and su- pervision of insurance are par- ticularly directed to the insurer’s interest and investors; hence, Malath is continuously work- ing on developing its internal systems to meet the advanced regulatory requirements.
Products Risk
Product risk is the risk relat- ed to changes in one of the existing products to meet the client’s needs and to make the product more marketable in a competitive environment.
These changes may affect
Risk Management
(continued)the coverage of the product and its requirements causing this risk. There is an exposure to risk in this category due to the fact that safety is involved in developing new insurance products and also settling for existing products.
Legal Controls Risk
Malath conducts its business in accordance with the Coop- erative Insurance Companies Control Law and its imple- menting regulations in force in the Kingdom of Saudi Arabia.
Malath is continously
working on developing its
internal systems to meet the reg- ulatory advanced requirements and conducts its business in ac- cordance with the law.
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The law defines the framework of insurance companies with regards to business lines, cap- ital and surplus requirements, the size of insurance claims, the scale and types of investments
technical standards, settlement arrangements, adequacy of reserves, and others.
Accordingly, any changes, amendments or new policies in the insurance laws could neg- atively affect the Company’s business, financial position and operational results.
The business of insurance companies is regulated and monitored by the Saudi Central Bank, which has full authority to take the necessary mea- sures to regulate the sector, including issuing approvals for business permits or modifying them, approving the offering of insurance products and their types, imposing fines, penalties, and others. In the event that the company fails to comply with the Cooperative Insurance Companies Control Law and its implementing regulations, it
will be exposed to fines or pen- alties, which will negatively and substantially affect its business results, financial performance or sustainability.