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Identify the financial impact of business decisions by creating financial statements

The program “Insurance accounting simulation - Profit and Cash” will get you there

Moving from 'Learning' to solving a 'Real Business Issue'

Focus on solving a business issue

Learning returns the highest benefit when it is properly applied to solving real business problems. We recommend the line manager and the employee agree on measurable goals that will address known business issues.

The employee might then need to attend a development program such as this workshop. The objective is not just to attend a workshop, but rather to increase the employee’s business and financial acumen, and as a direct result of this development program, identify and help achieve specific, measurable, value-creating performance goals. To illustrate moving from learning-related goals to performance-related goals, we have prepared the following suggestions, which of course should be modified to meet the specific needs of the line manager and employee.

A business issue is on the table
Manager asks employee to solve the business issue
Training takes place with the issue in mind
Employee focuses on solving the issue
Employee reports outcome

  • Issue needs to be solved asap
  • Employee is unclear how to do that
  • Definition of KPIs to solve the issue
  • Training will be recommended to help solve the issue
  • Maybe a workshop
  • Maybe on-line
  • Employee addresses the issue with the newly acquainted knowledge
  • Employee shares how it was possible to meet the KPIs
  • Issue is solved

Value creating performance

Value-Creating Goal

Using your increased corporate finance knowledge and business acumen, after discussions with your team and line manager, identify one new potential business opportunity which could increase revenue or reduce costs.

Suggested application tasks in order to meet the above-mentioned goal

Business opportunities could be from one of three major areas:

  1. increased Inflows (sales, collections or investments);
  2. better managed outflows (claims, services, expenses, and other payments);
  3. improving cycle time (more efficiently accomplishing one or both opportunities immediately above).

After reviewing the Swiss Re and/or selected client financial statements, determine the Key Performance Indicators (KPIs) which could be used to measure the specific business improvement opportunities. Your findings could be presented to your team, your line manager and Business Development (BD). From these findings a series of tangible actions can be identified with the goal to incorporate your idea(s) into the business pipeline or internal operations.

Summary

Addressing business issues - in a context of learning - promises to produce impressive ROIs.

When we consider all the benefits and costs, this type of training/development investment creates significant value and provides impressive quantifiable returns, both for the employee and for Swiss Re. Therefore, this approach moves us far beyond "just learning something"; it focuses us on the positive business outcomes by quantifying the expected costs and resulting value creation.

Our Thoughts – the Return on Investment (ROI) Calculation

This activity promises a strong ROI of 294%

The sections below reveal our calculation.

Select each thought (+) to learn more about it.

Increased inflows: Assume the possible business opportunity involves adding additional income. If the total revenue goal in the market is US$100,000,000 and is comprised of 1,000 individual opportunities, the value of a new opportunity is US$100,000 (US$100,000,000/1,000). Possible ways to increase inflows might include new business opportunities, accelerating collections of premiums receivable, improving investment returns, adding new non-risk bearing income, etc.

Better managed outflows: Assume, due to the employee’s increased business and financial acumen, a current $100,000 annual outflow can be identified and analysed for potential savings. Possible outflow reductions might result from more informed auditing of loss portfolios, reduced loss adjustment expense reimbursements, elimination of non-value-added tasks or eliminating redundant expenses, etc.

Improved cycle time: Assume ways to introduce more efficient processing can lead to similar potential opportunities as those described above.

Quantifiable value: We assume that the direct benefit from the new improved inflow, better managed outflow or improved, more efficient cycle time opportunities, could be 5%. The value of attending the workshop therefore can be calculated this way: US$100,000 x 5%, which equates to US$5,000 in benefit from having attended the workshop.

Non-quantifiable value: Besides these measurable values, there are also non-quantitative benefits of this workshop. These include for example the value of enhancing finance and business acumen/competencies of the employee, as well as the enhancement of work quality, which often materialize over time. Participation in the simulation also provides valuable opportunities to practice decision making and allows thinking in new ways while offering better recognition of the participants’ own strengths and weaknesses. Decisions are made within a complex and dynamic setting, and participants experience real-time information and feedback – they see the outcome of their decisions. The simulation provides a deeper understanding of the workshop materials and furthers development of personal skills such as teamwork and critical thinking.

Assume the cost of participating in the half-day workshop is US$300 which is the Swiss Re average cost.

Also assume the opportunity cost for being away from the desk for a half day is US$700. Further assume that half a day of work is required to apply the findings and to achieve the above-mentioned performance goals, which adds an additional US$700 opportunity cost for not being productive.

Therefore, the total cost of this learning investment is assumed to be US$1,700 (US$300 + US$700 + US$700).

The ROI in this case equates to a high 294% (US$5,000/US$1,700).

Let's not forget, that this ROI calculation is not considering the above-mentioned non-quantifiable benefits.

Additional savings could result since the savings could reoccur in subsequent years and the learnings from the workshop could be applied to other situations. In your own individual case, the numbers may differ, our intention here is to offer an example for creating your own ROI calculations.
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