After the increasing capital requirements of funding catastrophes raised the risk to its balance sheet, USAA, the San Antonio, Texas-based financial services provider and the largest provider of property/casualty and life insurance products to the military, realized that although it was highly competent in risk management, the company had not holistically managed its total risk profile in an integrated fashion. "There were increasing expectations of risk governance at the board level, escalating expectations by regulators for rigorous risk management practices and the growing unpredictability of extreme events like natural disasters and economic downturns," explains Chris Mandel, USAA's assistant vice president of ERM. "There was a general recognition that there were more sophisticated ways to manage risk and compete more effectively in our markets."

To meet that challenge, the company adopted "risk identification, assessment and management" as a new core competency and started the Enterprise Risk Management Center of Excellence a few years ago, which houses the company's ERM program. The effort began small, given limited resource and time allocations. Management also wanted some quick wins to prove the strategy's merits. The first priority was to build a risk governance infrastructure to support robust risk decision making. Sixteen mid- to senior-level executives with broad operational experience were given the additional responsibility of being a risk officer in their respective business segments.

"For example, the property and casualty company's chief actuary is also the risk management officer (RMO) of that group. "Within the Center of Excellence is a central repository for risk-based data, from which reports are generated. This gives RMOs, senior managers and board members a complete view of the most significant threats," Mandel says.As for the success of the ERM initiative: In Standard & Poor's 2006 assessment of USAA's financial strength, the rating agency labeled its ERM program "an insurance industry leader" and gave USAA its highest rating of "excellent in ERM."