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IAI Actuarial Core Principles · Business Management · Business and consumer needs, the industry value chain and competitive forces

Suraksha Life, an Indian life insurer, is reviewing its strategy. The board lists policyholders, shareholders, employees, the regulator (IRDAI) and local communities as stakeholders. Which description best captures why an insurer's management must analyse each group's objectives separately?

Management must analyse each stakeholder group separately because their objectives often differ or conflict. Policyholders seek security and value, shareholders seek returns, and employees seek rewards and stability. Strategy has to balance these competing interests rather than assume they are identical or serve only one group.

  1. AEvery stakeholder group wants the same outcome, so analysis is only needed once
  2. BStakeholders' objectives often differ or conflict, so strategy must balance themCorrect
  3. COnly shareholders' objectives matter because they own the company
  4. DRegulators' objectives override all others, so the rest need not be analysed
  5. Employees' objectives are fixed by law and cannot influence strategy

Explanation

Different stakeholders pursue different goals: policyholders want security and fair value, shareholders want returns, employees want pay and job security. These can conflict, so management must identify and balance them. Treating them as identical or ignoring groups would leave strategic risks unmanaged.

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