Pillar 2 requires companies to place risk management at the heart of their operational business models. It involves the introduction of a new standard framework for risk management that forms an integral part of all managerial functions.
The tools and framework, together with the ERM approach, serve to align company strategy with the risk accepted and taken on by management and operational staff. Under this Pillar 2 approach, the risk function becomes the cornerstone of the risk management system.
This paper is designed as a toolbox for those involved in the organisational aspects of Solvency II compliance. Following a brief overview of the regulatory requirements and the ERM framework, we break down the operational issues involved in Solvency II compliance projects (risk management function, organisation and governance of the overall risk management processes, and scoping of ‘cross business’ projects such as data quality and ORSA). We also highlight the fundamental questions and, based on concrete examples, sketch out the main operational approaches to answering them.