Invoking a Situationally Aware Culture - Linking Emerging Risk to Strategy & Innovation

1. Invoking a Situationally
Aware Culture
Linking Emerging Risk to Strategy &
Innovation
October 2020

2. 2
Journey to the Future
What do emerging risks and exoplanets have in common?
Both can appear to be distant worlds upon which a human will never set foot.
De-risk the term ‘emergingrisk’–
Threat – to future executionof strategic plans and objectives
Opportunity – to exploitdisruptionto competitiveadvantage
Objective– ‘turning unknown unknowns into known knowns’
Unknown
Unknown
Known
Unknown
Known
Known
Known
Value
Divination Emerging Risk
Management
Risk Management Strategic Management
Realized
Value
Innovative Management
Knowledge is power, but only if we apply it!

3. 3
Disruptive Beasts and Where to Find Them
Black Swans
• Common term for a ‘rara avis’.
• Less a symptom of random chaos theory and more one of poor situational awareness.
• So-called ‘Black Swans’ are rarely that and do not simply crystalize in an isolated and unconnected
void.
• Covid-19 is not a black swan.
Elephant in the Room
• Governments and Corporates often fail to address the elephants in their Cabinet and Board rooms.
• Prior to Covid-19 Pandemic was one of those elephants, Climate has moved out the out to the lobby,
but issues such as societal impact from technology, and aging demographic financing remain.
Grey Rhinos
• Michele Wucker ‘The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore’
• Almost all emerging threats and opportunities are a variation on a known theme.
• Covid-19 is a Grey Rhino

4. 4
Cycles of Connectivity
Velocity
• Technology has driven an exponential change in pace of mega-trends and material disruptors.
• Rapidly evolving threats and opportunities slamemerging risk and strategic risk together.
• This places more urgency and rigour on forward-lookingstrategic plans and ability to be more
proactive than reactive.
• Frame ‘time-to-impact’against the business plan period (1-3/5 years).
Correlation and interconnectivity
• Covid-19 – reminding us that we live in a world of connected dependencyand connected fate.
• Interconnected nature of emerging, technology driven, risks present a greater challenge.
• Sudden change within one branch of an ecosystemenables and accelerates change in other
branches.
• Requires firms to operate in a more agile and joined-up way to respond holistically.
• Covid-19 – accelerating the adoption of automation– taking people out of the loop.
• Keep your emerging risk correlation matrix correlated.

5. 5
Be Aware of Your Surroundings
• Building a situational awareness culture;
• Embrace diversity of perception - diversity of
perception comes from having a diverse workforce
that broadens/challenges preconceptions;
• Leverage experience – leverage the collective,
and the diverse, experience of the workforce;
• Promote company-wide collaboration &
communication on the changing environment;
• Encourage lateral possible-future-states thinking;
• Create scenarios and simulations to create plans
and train thinking;
• Argo’s stated purpose – To ‘secure the future for our policyholders, employees, shareholders, and
community’
• We - ‘Help businesses stay in business’
• An insurer’s business is to protect other people’s business from uncertainty.
• Our business model is, therefore, impacted by the emerging risks that impact everyone else’s business
model.
Good situational awareness creates a culture of strong risk intelligence.

6. 6
Promoting a Situation Aware Culture
For most firms restating or reinventing its culture right now is only likely to add to disruption and uncertainty but
repositioning or creating new reinforcements to its values and behaviours to enable a more effective culture is
crucial;
• Create Situational Awareness – embrace diversity and collaboration to enhance risk intelligence and bolster desired
behaviours as environments are changing;
• Champion Creative Collaboration – encourage and enable a wide range of collaborative endeavours to develop more
agile and adaptive workforces;
• Create New Leadership Levers - promote a psychological safe environment for innovation and adaption through
transparent and consistent ‘tone from the top’ support for local lateral solutions.
• Acknowledge Disruption – recognise, listen and openly communicate on bottom-up reporting of evolving environment
challenges faced by the business.
• ReinventAuthority – truly empower employees so that they can make meaningful changes to respond to new situations;
• Create a flexible control culture - that enables creative responses rather than stifles them. Crisis invokes a desire for
greater control but the impact of an extreme crisis cannot be controlled, thus a strong control culture can constrain survival.
• State Purpose over Profit – clearly set out a companies purpose and emphasize that ahead of profit; where purpose is put
first, profits generally follow; when profits are first, the results can be more elusive.

7. 7
A Solar-system of Situational Awareness
Emerging
Risk
Futurist &
Academic
Think-tanks Insurance
Industry
Sources
Insured
Sector
Sources
New
Technology
Sources
Geo-political
Sources,
Analysts
Macro-
economic &
Market
AnalysisScientific
Papers &
Forums
Evolving
Legal &
Regulatory
Planets –
populations
of intelligence
Moons –
In-house
intelligence
Comets –
Ad-hoc
intelligence
• Risk
Forums
• Producers
• Other
Insurers
• Innovative
Partners
• Innovative
Customers
Star – Your
center of
intelligence
• Business
Sector
Forums
• Academics
• Specialists
Management/
Function Heads
Political Risk
Underwriter
Country
Manager
FPA
Investment
Officer
Investment
Management
FirmsSurety &
Professional
Lines
Underwriters
Exposure
Management
Specialty
Underwriters
In-house
Counsel
Claims
External
Counsel
Exec MgtERM
Function
Specialty
Underwriters
Risk control
engineers
Digital
Team
Automation/
RPA Team
Technology
E&O
Underwriter
Star Chart

8. 8
Cornerstones of Argo Situational Awareness
Argo’s situational awareness framework and culture is designed to support a ground-up view of the shifting
environment within which the business operates. This view informs and sets the forward-looking strategy
which in turn drives a top-down directive for execution.
Strategy
Strategy
Innovation
Exposure
Relevance
Strategy - Executives create a more sustainableforward
looking plan enabled by an informed view of material changes to
Argo’s operating environment over the next five years.
Strategy Execution – the forward looking strategy provides a
top down message which endorses a situational awareness
culture to executing Argo plans and objectives.
Innovation – The ‘disruptive opportunity’ mindset
enables Argo to look beyond threats to the business and
evaluate where to gain market advantage from offering
products/deploying tools early in the disruptioncycle.
Innovation Execution – The Emerging Risk and
Innovation Frameworks are explicitly linked. The
Innovation function and tools provide a mechanism to
execute innovation associated to Argo 2025 vision.
Exposure – The ‘threat evaluation’ mindset
enables Argo to deploy expert internal and
external resources to assess our capability to
assess exposure.
Exposure Evaluation – Emerging Risk and
Exposure Management Frameworks are
explicitly linked through formal product
portfolio and investment portfolio analysis
processes.
Determining Relevance – SME
panel determines relevance of
potential disruptor.
Relevance – Situationaware culture
enables all Argo staff to raise
potentially relevant disruptors.

9. 9
Integrated Risk Awareness Framework
Strategic
Planning
SWOT
Product
Strategy
Board
Emerging
Risk Paper
Executive
Committee
Group Strategic
Risk Landscape
(T & O)
BU Strategy
Delivery Risk
Assessment
ER Risk
BU Risk
Profile/
Dashboard
Risk
Steering
Committee
Underwriting
Committees
Emerging
Hazard
T & O
Group
Underwriting
Emerging
Risk T & O
Profile
Emerging
Risk Review
Group
Emerging
Product UW
T & O Profile
Product
Disruption
= T
BU Plan
Performance
Reviews
Emerging
Risk Deep
Dive T & O
Emerging
Risk SME
Panel
Product
Deep Dive
= O
Risk
Champion
Strategic
Risk
Assessment
Emerging
Risk
Assessment
Emerging UW
Product Risk
Assessment
KEY
Planning
Review
Assessment
Reporting
Governance
ER Portal
ERM &
Group
Underwriting
Innovation
Council &
Working
Group

10. 10
Situational Awareness – Governance & Reporting
• The Board – Strategic Threat & Opportunity Landscape – CRO view of key current and emerging
material threats and opportunities;
• Board Risk Committee – Emerging Threat & Opportunity summary of material points and decisions
from the Emerging Risk Review Group;
• Emerging Risk Review Group – Cross-discipline review group made up of Underwriting Line,
Functional Heads, and Subject Matter Experts (SME) which reports on quarterly ER profile movements.
All emerging threats and opportunities are owned by a business owner and associated to one or more
Argo business functions. ER owners and SME’s present their analysis at each meeting for review.
• US Operating Performance Review– Risk & Capital Dashboard covering emerging threats and
opportunities to all US underwriting business units and US segment which forms part of the quarterly US
business performance review;
• Group Line-of-Business Underwriting Committee – The Risk Function works closely with the Group
Underwriting Function to identify emerging underwriting/insured sector disruptors which are reported to
each Underwriting Committee within the ‘emerging hazards’ component of the agenda.
• Group Innovation Council – Opportunities identified from evolving disruptors are presented to a ‘shark-
tank’ of senior managers to determine value in go-forward investment in the opportunity.

11. 11
Situational Awareness – Identification &
Assessment
• Underwriting Business Unit Quarterly Risk Dashboard – quarterly plan execution risk dashboard for
each of fifteen US Underwriting BUs which incorporates material emerging threats and opportunities
section. These are discussed with the BU Leaders and assessed/updated using a set of criticality criteria
– potential financial and reputational impact, likelihood of emergence, velocity (Time –to-Impact).
• Quarterly Emerging Risk Deep Dives – Undertaken as part of the ERRG reporting process. Deep dives
are made on selected evolving and material topics which are presented to the ERRG by subject matter
experts.
• Innovation Team Challenge – Emerging disruptor opportunities are identified each quarter and a team
assembled from Argo staff led by an Innovation Champion to research and present the opportunity.
• Emerging Risk Assessment – Undertaken Group-wide on an annual basis as part of the ground-up risk
assessment process. External emerging disruptor survey taken on Argo brokers/business producers.
• Planning Process – Risk and Finance Functions work closely on the planning templates which include a
SWOT, and a forward looking 12, 24, and 36 > 60 month interval material emerging trends assessment.
• Emerging Threat Portal/Innovation Portal – Argo have intranet portals for any member of staff to
report emerging trend that could have an impact on Argo operating model. The Innovation Portal is linked
to a rewards and recognition framework.

12. 12
Exposure & Innovation Situational Awareness
Emerging Threat &
Opportunity Profile
Product Portfolio
Disruption Matrix
Broker/Agent
Producer Survey
Perils
Matrix
Known Unknown Threat Known Unknown Opportunity
Emerging
Hazard
Deep Dive
Emerging
Opportunity
Innovation
Working Group
Emerging
Opportunity
Deep Dive
Line of Business
Group
Underwriting
Committee
Innovation
Council

13. 13
Products and Perils – Tools for Threat Management
Argo
Product
Portfolio
Disruption
Drivers
Premium
& Growth
Weighting
Underwriter
assessment
narrative
Aggregate
Disruptor
Weighting
Product Portfolio Disruption Matrix -
group-wide initiative to identify, evaluate
and manage the emerging risks to
Argo’s product offering. The exercise
considers;
Disruptive Drivers; baseline matrices by industry/factor (scored
by impact and velocity) aligned to Argo’s appetite by industry
sector.
Scoresheet; 57 key products correlated to underwriting
performance metrics
Products scored by 14 disruptive factors (5 x scale) aggregated
and uplifted by premium contribution weighting based on
underwriting strategy premium projections
Risk Register; Product coverage/Sector and Geographic profile.
Materiality; scored by disruptive factor aggregate (From
Scoresheet), 12-24 month> premium growth % (Are we
strategically growing into a disruptive threat or opportunity)
Likelihood; Velocity ( 5x scale 0-5 year+ horizon)
Threat & OpportunityProfiler; plotting each product by
vulnerability and time to impact
Exposure Management Peril
Capability Matrix - used tomonitor
emerging risks against all lines of
business
Following Product Portfolio Disruption assessment, the matrix
records if a lob is exposed and if there are any measures
(Models, RDS) and controls in place (RDS limit, aggregate limit,
PML limit).
It provides a high level triage tool; is a class definitely exposed,
potentially exposed or definitely not exposed.
Where a peril is identified as affecting classes materially, and
there are no measures or controls, this is the trigger for further
work to control exposure to the peril.

14. 14
Disruptive Opportunity – Tools for Innovation
Innovation Portal & Working Group -
group-wide innovation portal supported
by training and awareness events &
reward incentives;
Innovation Council – Shark Tank
reviews product & process efficiency
opportunities presented by idea
development working groups;
Q3 2020 Challenge – TheEconomy of the Future
– disruptors;
• Working groups assembled from Argo SME’s, external
SME’s contacted to discuss business models and operating
environments.
• Financial, Market and Investment data gathered.
• Threat & opportunity analysis completed.
• Go-forward business case compiled.
• Business case presented to ‘Shark-tank’ at the Innovation
Council for go-forward review.

15. 15
Key Take-aways
Keep it simple:
• use plain, business relevant,
language,
• don’t get hung up on
boundaries - time/impact.
Make it relevant:
• tie emerging risk to your
footprint, your strategy,
• get the business to validate
and own the emerging risk.
Build intelligence:
• think outside the box, develop
diverse sources,
• leverage your in-house SME’s
and coal face knowledge.
Hardwire thinking:
• thread throughout the business
– not a risk function thing!
• championthe strategic –
future proofing, competitive,
opportunity
Situational Awareness& Emerging Risk Management -
Looking ahead for what is sneaking up behind you!