Case Study Description of Mid Ocean Ltd.: Trading Catastrophe Index Options
An insurance industry executive must evaluate the potential of a set of newly-offered catastrophe insurance derivatives. The background addresses the roles of traditional reinsurance and securitization efforts in providing risk transfer and risk financing in the "cat" insurance field. The benefits and difficulties involved in commoditizing a new asset class are explored as well.
Swot Analysis of "Mid Ocean Ltd.: Trading Catastrophe Index Options" written by Kenneth A. Froot, Markus F. Mullarkey includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Catastrophe Insurance facing as an external strategic factors. Some of the topics covered in Mid Ocean Ltd.: Trading Catastrophe Index Options case study are - Strategic Management Strategies, Financial markets, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Mid Ocean Ltd.: Trading Catastrophe Index Options casestudy better are - – geopolitical disruptions, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
there is increasing trade war between United States & China, increasing energy prices, etc
Introduction to SWOT Analysis of Mid Ocean Ltd.: Trading Catastrophe Index Options
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Mid Ocean Ltd.: Trading Catastrophe Index Options case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Catastrophe Insurance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Catastrophe Insurance operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Mid Ocean Ltd.: Trading Catastrophe Index Options can be done for the following purposes –
1. Strategic planning using facts provided in Mid Ocean Ltd.: Trading Catastrophe Index Options case study
2. Improving business portfolio management of Catastrophe Insurance
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Catastrophe Insurance
Strengths Mid Ocean Ltd.: Trading Catastrophe Index Options | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Catastrophe Insurance in Mid Ocean Ltd.: Trading Catastrophe Index Options Harvard Business Review case study are -
Innovation driven organization
– Catastrophe Insurance is one of the most innovative firm in sector. Manager in Mid Ocean Ltd.: Trading Catastrophe Index Options Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Catastrophe Insurance has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Mid Ocean Ltd.: Trading Catastrophe Index Options - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Catastrophe Insurance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Catastrophe Insurance has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Organizational Resilience of Catastrophe Insurance
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Catastrophe Insurance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Catastrophe Insurance is one of the leading recruiters in the industry. Managers in the Mid Ocean Ltd.: Trading Catastrophe Index Options are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Catastrophe Insurance in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Catastrophe Insurance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Catastrophe Insurance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Finance & Accounting industry
– Mid Ocean Ltd.: Trading Catastrophe Index Options firm has clearly differentiated products in the market place. This has enabled Catastrophe Insurance to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Catastrophe Insurance to invest into research and development (R&D) and innovation.
Learning organization
- Catastrophe Insurance is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Catastrophe Insurance is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Mid Ocean Ltd.: Trading Catastrophe Index Options Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Catastrophe Insurance has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Catastrophe Insurance is present in almost all the verticals within the industry. This has provided firm in Mid Ocean Ltd.: Trading Catastrophe Index Options case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Cross disciplinary teams
– Horizontal connected teams at the Catastrophe Insurance are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Mid Ocean Ltd.: Trading Catastrophe Index Options | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Mid Ocean Ltd.: Trading Catastrophe Index Options are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Mid Ocean Ltd.: Trading Catastrophe Index Options, in the dynamic environment Catastrophe Insurance has struggled to respond to the nimble upstart competition. Catastrophe Insurance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Catastrophe Insurance needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Mid Ocean Ltd.: Trading Catastrophe Index Options HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Catastrophe Insurance has relatively successful track record of launching new products.
High cash cycle compare to competitors
Catastrophe Insurance has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Catastrophe Insurance has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, Catastrophe Insurance has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Catastrophe Insurance is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Catastrophe Insurance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Catastrophe Insurance to focus more on services rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Catastrophe Insurance supply chain. Even after few cautionary changes mentioned in the HBR case study - Mid Ocean Ltd.: Trading Catastrophe Index Options, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Catastrophe Insurance vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Mid Ocean Ltd.: Trading Catastrophe Index Options, is just above the industry average. Catastrophe Insurance needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
No frontier risks strategy
– After analyzing the HBR case study Mid Ocean Ltd.: Trading Catastrophe Index Options, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to strategic competitive environment developments
– As Mid Ocean Ltd.: Trading Catastrophe Index Options HBR case study mentions - Catastrophe Insurance takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Mid Ocean Ltd.: Trading Catastrophe Index Options | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Mid Ocean Ltd.: Trading Catastrophe Index Options are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Catastrophe Insurance can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Mid Ocean Ltd.: Trading Catastrophe Index Options, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Catastrophe Insurance is facing challenges because of the dominance of functional experts in the organization. Mid Ocean Ltd.: Trading Catastrophe Index Options case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Catastrophe Insurance can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Catastrophe Insurance can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Catastrophe Insurance can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Mid Ocean Ltd.: Trading Catastrophe Index Options suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Catastrophe Insurance in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Catastrophe Insurance can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Catastrophe Insurance can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Creating value in data economy
– The success of analytics program of Catastrophe Insurance has opened avenues for new revenue streams for the organization in the industry. This can help Catastrophe Insurance to build a more holistic ecosystem as suggested in the Mid Ocean Ltd.: Trading Catastrophe Index Options case study. Catastrophe Insurance can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Catastrophe Insurance to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Catastrophe Insurance to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Catastrophe Insurance to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Catastrophe Insurance can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Building a culture of innovation
– managers at Catastrophe Insurance can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Threats Mid Ocean Ltd.: Trading Catastrophe Index Options External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Mid Ocean Ltd.: Trading Catastrophe Index Options are -
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Catastrophe Insurance in the Finance & Accounting sector and impact the bottomline of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Catastrophe Insurance needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Regulatory challenges
– Catastrophe Insurance needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Catastrophe Insurance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Mid Ocean Ltd.: Trading Catastrophe Index Options, Catastrophe Insurance may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Catastrophe Insurance in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Shortening product life cycle
– it is one of the major threat that Catastrophe Insurance is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Catastrophe Insurance
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Catastrophe Insurance.
Environmental challenges
– Catastrophe Insurance needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Catastrophe Insurance can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– Catastrophe Insurance high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Catastrophe Insurance.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of Mid Ocean Ltd.: Trading Catastrophe Index Options Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Mid Ocean Ltd.: Trading Catastrophe Index Options needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Mid Ocean Ltd.: Trading Catastrophe Index Options is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Mid Ocean Ltd.: Trading Catastrophe Index Options is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Mid Ocean Ltd.: Trading Catastrophe Index Options is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Catastrophe Insurance needs to make to build a sustainable competitive advantage.
