2016 Analysis on Beyond Implementation, Insurance, Business and Market Effect...
Commercial Risk Europe p1 & p16
1. Adrian Ladbury
aladbury@commercialriskeurope.com
[LONDON]—EUROPEAN AND INTERNATIONAL
risk managers will be delighted to see little
evidence of an overall market hardening
in the global corporate insurance market
provided by the first slew of third quarter
results from leading international insurers
and specialty carriers.
The big US insurers and Bermuda
market players (including those that were
born in Bermuda but relocated to Ireland
or Switzerland) report first and did so at the
end of October.
Almost all reported healthy profits and
decent combined ratios boosted by relatively
low losses. Investment returns remain low
by historical standards but are showing signs
of improvement.
A number of insurers again reported
reserve releases to boost their combined
ratios.
There therefore still seems little threat
of a generally hardening market driven by
the need for reserve additions because of
consistently underpriced liability business.
Though this will be dependent upon fiscal
policy that can change rapidly.
Premium growth was not strong in most
cases as insurers generally reported further
reductions and flat rates at best for most of
the main lines. The main exceptions were
specialty lines that have suffered significant
losses such as the aviation market.
Generally speaking CEOs talked about
disciplined underwriting in select markets
in which they specialise.
This means that insurers are investing
in specialist skills and services to win new
business, which again can only be good news
for risk managers.
The most exciting markets for growth
remain so-called emerging regions such as
Asia and Latin America where underlying
economic growth is higher than mature
markets and insurance penetration rates are
rising for personal and business insurance.
The fact that the big corporate insurers
continue to invest in these regions for
growth is again good news for risk managers
who seek multinational insurance solutions
as their companies also expand to such
regions.
BRAZILIAN BACKING
The news that ACE, for example, has been
given regulatory approval to complete a
Brazilian acquisition and become the leading
commercial insurer in that fast-growing
nation can only be good news for corporate
insurance buyers.
The CEOs did their best to talk up the
market as ever. But it was interesting to note
that a number of those insurers that have
reported returned significant slugs of capital
to investors, suggesting again that they are
not that bullish about market conditions
going forward.
The reinsurance market remains
highly competitive and awash with capital
provided by capital market investors as they
seek returns in what remains a low yield
environment worldwide.
It may be too early for the capital markets
to consider trying their luck in the large
corporate sector through direct risk transfer
solutions for captives, for example.
But the continued glut of capacity at
the top end of the market will surely entice
the big reinsurers to continue their recent
strategy of expansion downwards into the
corporate insurance market.
AIG reported net income of $2.2bn for
the third quarter of 2014, up 1% on the prior
year quarter. After tax operating income was
$1.7bn, up 23% from $1.4bn in 2013.
AIG’s property casualty business
increased pre-tax operating income by 2%
to $1.1bn. Its third quarter 2014 combined
ratio was 102%, a 0.4 point increase from
the prior-year quarter. This was inflated by
AIG bucking the general trend and taking
a $227m reserve addition, primarily in the
primary casualty business.
AIG NUMBERS
These increases were partially offset by a
$23m decrease in commercial insurance
severe losses to $188m. Catastrophe losses
were $284m, compared to $222m in the
third quarter of 2013.
The company also said that it had
authorised additional share repurchases of
$1.5bn. It has bought back $3.4bn of shares
during the year so far.
“The solid third quarter results were
driven by consistent performance across
our businesses,” said Peter Hancock, AIG
PresidentandChiefExecutiveOfficer.“While
no one quarter is a trend, our risk-adjusted
return focus could be seen in various metrics
Corporate insurance buyers can expect
relaxed renewals based on initial Q3 data
FOCUS ON BROKERSLINK:
BrokersLink is a network of over 60 brokers
and 15 providers. It operates in 80 countries,
boasts over 300 offices worldwide staffed by
more than 7,000 risk professionals....... p13-14
Commercial Risk EuropeEUROPEAN INSURANCE & RISK MANAGEMENT NEWS
www.commercialriskeurope.com
VOLUME 5/ ISSUE 09/ NOVEMBER 2014
REPORT: MANAGING RISK IN COMPLEX ORGANISATIONS
A major new report by the Institute of Risk Management looks
at how increased compliance and a tick box approach to supply
chain risk management will not prevent scandals and can actually
increase vulnerability of extended enterprises.................................. p8-9
Commercial Risk Europe
Ben Norris
bnorris@commercialriskeurope.com
[ L O N D O N ] — E X P E R T S H AV E
welcomed new guidance from the
Financial Reporting Council (FRC) on
risk management, internal control and
related financial and business reporting
that forms part of the updated UK
Corporate Governance Code (the code)
as a major boost for risk management.
The new guidance makes clear
that while risk managers may
have day-to-day responsibility for
implementation and management, it
is the responsibility of boards to ensure
that appropriate risk policies are in
place, their understanding of risk is
high, that risks are maintained within
tolerable levels and that risk mitigation
is sufficient.
To perform this task UK boards
are going to have to rely on their risk
management teams to provide them
with the appropriate information, say
experts. According to leading bodies
including Airmic and the IRM this
presents a real opportunity for the
risk community to add value and
will inevitably raise the profile of the
profession.
GOOD GUIDE
Although the guidance is aimed at
listed UK companies bound to follow
the code all other types of organisations
and their risk managers are advised to
implement its recommendations.
The FRC updated the UK
Corporate Governance Code and
published the accompanying Guidance
On Risk Management And Internal
Control And Related Financial And
Business Reporting on 17 September.
The revised code and guidance applies
to accounting periods beginning on or
after 1 October, 2014.
The changes to the code include
the need for boards to include a
forward-looking ‘viability statement’
in their strategic report to investors
as well as develop new approaches to
remuneration and, crucially for readers
of CRE, risk management and internal
control.
The code will continue to operate
on a ‘comply or explain’ basis.
FRC.
New guidance from FRC is a shot
in the arm for risk management
FRC: Turn to P16
RESULTS.
RESULTS: Turn to P18
Peter Hancock
Stuart Collins
news@commercialriskeurope.com
[LONDON]—MULTINATIONAL COMP-
aniesarebeingurgedtochecksupplychains
and insurance cover as the Ebola outbreak
in west Africa continues to pose
a risk.
WORST IN HISTORY
According to the World Health
Organisation (WHO), at the end of
October there had been almost 5,000
deaths from almost 14,000 cases of
the Ebola outbreak. The vast majority
of cases have occurred in Liberia, Sierra
Leone and Guinea. Spain, the US,
Senegal, Nigeria and most recently
Mali have experienced isolated cases.
If left unchecked the Ebola disease
outbreak in west Africa has the pot-
ential to be the most deadly infectious
disease event since the 1918 flu
pandemic, according to modelling
carried out by RMS. The catastrophe
modelling firm estimates that the
current outbreak will worsen and could
reach as many as 1,400 new cases per
day within a month.
Despite international assistance
now arriving in the worst affected
countries, the outbreak is expected
to worsen—with the total number of
new cases approximately doubling each
month—until a tipping point is reached
EBOLA: Turn to P16
EBOLA.
Multinationals urged to
check supply chains and
coverage on Ebola threat
Corporate insurance buyers can expect
Commercial Risk EuropeEUROPEAN INSURANCE & RISK MANAGEMENT NEWS
Commercial Risk EuropeEUROPEAN INSURANCE & RISK MANAGEMENT NEWS
Commercial Risk Europe
p8-9
01_CRE_Y5_09_News.indd 1 12/11/14 16:17:51
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E152223 AIG13085_PRPTY_Glbl500_FP_UK_A3.indd 1 23/09/2013 09:37
02_CRE_Y5_09_FAP.indd 2 4/11/14 16:25:09
3. InnovationNEWS 3
Ben Norris
bnorris@commercialriskeurope
[LONDON]
L
EADING RISK MANAGERS THAT THIS
month once again called on insurers to up
their game and deliver new solutions to
the ever-changing risk landscape will be
pleased by sounds coming out of the risk
transfer industry that the influx of new and alternative
market capital demands an innovative response.
Traditional insurers must view the alternative capital
as a spur to meet client demands with new risk solutions,
key to the industry weathering growing competition
for business, said insurers and brokers at a number of
industry events over the past few weeks.
Addressing the International Underwriters
Association (IUA) in late October Paul Hopkin,
Technical Director at Airmic, warned insurers that they
must deliver new solutions to strategic business risks or
lose relevance.
Insurers must adapt to the changing needs of
business and develop solutions that support business
strategy rather than simply focusing on physical
operations, he urged.
This requires dialogue with clients, said Mr Hopkin,
who questioned whether recent attempts to supply them
with new coverages have been particularly relevant.
He told the IUA that insurance continues to be a
critical source of protection, but that traditional types
of cover are ‘losing their strategic value’ as companies’
physical assets become less important to business
models.
Business models increasingly rely on outsourcing
and in many cases their most important assets, such as
reputation, are non-physical, he pointed out.
ADAPT OR DIE
“Insurance must therefore adapt to this or risk becoming
less relevant to corporate strategy,” he added. The
most successful insurers will be those that respond to
increasingly complex and intangible risks such as cyber,
supply chain, reputation and nanotechnology, he said.
To deliver innovative solutions insurers need a
greater understanding of their clients’ needs and
increased dialogue with business, he continued.
“There needs to be a dialogue between the insurer
and the insured. There is no point developing innovative
products in isolation of the people you are hoping to sell
the products to,” he told the IUA.
Although underwriters have started to respond to
the need for new solutions, there has not always been a
strong take-up of new products from corporate buyers.
This is partly because the new coverages are missing
their target, pointed out Mr Hopkin.
“There has been a lot of innovation around supply
chain, for example, but how relevant has it been?”
he asked.
Mr Hopkin’s message for the insurance industry
was echoed by Ferma president Julia Graham. Speaking
to Commercial Risk Europe she said there is a need for
more innovation from insurers and brokers to enable
organisations to cover risks that remain non-transferable.
“Discussions going on in areas like cyber and
reputation risk create a demand for our partners to come
up with solutions…We do not want insurers to move
away from actuarial principles but they do need to be
a bit more forward looking. People talk innovation but
it has been a long time coming,” said Ms Graham, who
is also director of risk management and insurance at
international law firm DLA Piper.
Ms Graham also said that she believes risk transfer
partners are receptive to demands from insureds for new
covers. “We risk managers do realise this is not easy. If
it was easy, then everybody would have come up with
answers already,” she conceded.
The two Ferma and Airmic stalwarts, as well as their
risk management colleagues around Europe and beyond,
will be pleased that a number of insurance industry
big hitters this month urged their profession to view
the challenge thrown up by huge growth in alternative
capital as an opportunity to meet client demands as
opposed to a business threat.
Aon Benfield calculates that total global reinsurance
capital reached its highest ever level of $570bn at the
end of June. Guy Carpenter has described the $20bn
of alternative capital that has entered the market over
the past two years as ‘the largest change to the sector’s
capital structure in recent memory’.
In response both Andrew Kendrick, President of
ACE European Group, and Mike McGavick, XL Group’s
CEO, said their industry must respond by boosting
efforts to innovate and better deliver for insureds.
Speaking at an Insurance of London (ILL) lecture
in London, Mr Kendrick said the new capital means
that traditional players must redouble their efforts on
innovation and deliver better service in order to maintain
their market position.
Conceding that there is a ‘sense of frustration on the
part of some larger clients that the insurance industry
seems unable or unwilling to innovate’, Mr Kendrick
therefore urged his colleagues to help risk managers
tackle non-traditional risks caused by threats such as
pandemics and increasingly complex supply chains.
“I’m not suggesting for a moment that all of
these risks are fully insurable…but I do know that
risk managers want and need more support from the
industry,” he said.
He also said the insurers need to deliver superior
service and a more client-centric approach.
“A hedge fund cannot, at least on its own, act as
a true partner to an insured, successfully providing
consultancy, risk management planning and—in a
word—service. So if we are to differentiate ourselves
from the newer alternatives, then I believe that
traditional players will need to become more customer-
centric,” he said.
“This isn’t the time to pull up the drawbridge and
retreat into the cosy comfort zone of the past. That
approach may not lead to sudden death. But it could
bring a slow, terminal decline. Instead, we need to take
advantage of the opportunity that this new capacity
brings to stimulate our risk appetite and creativity,” he
added.
Speaking at the BrokersLink Global Conference
in Venice, Italy, Mr McGavick said the new capital
represents an opportunity for traditional insurers to
realign themselves with client needs. He said insurers
should look to harness the new funds for the benefit of
insureds.
“I view this capital coming into our industry as an
opportunity, not a threat. Supported by analytics and
our deep understanding of risk, we must be adaptive in
finding ways to use this capital to cover the long list of
new and increasingly technology-related risks to respond
to the unmet needs of a global economy,” Mr McGavick
said.
He said that being adaptive is ‘key to survival’.
“We must find a way to respond to new exposures and
overcome the challenges, because it’s only going to
get tougher and not delivering is not an option,” he
continued.
“Today risk managers and their boards are looking to
you, their brokers, and us, the underwriters, for answers.
And here lies our opportunity, let’s take it,” he told the
BrokersLink conference.
Meanwhile experts from across the risk transfer
industry gathered at the Baden-Baden Reinsurance
Symposium last month agreed that new solutions are
key to the traditional risk transfer industry weathering
the alternative capital storm.
Speaking at the meeting, Nick Frankland, Chief
Executive Officer of EMEA Operations at host firm Guy
Carpenter, said the wide variety of capital supply means
a huge choice for customers.
“So we [brokers] must become expert in and able
to advise our clients on all that is available, helping to
create solutions that exploit this cornucopia. We must
also work with the reinsurers and insurers to stimulate
demand by filling known insurance gaps and providing
solutions for the new breed of risks,” he said.
Ulrich Wallin, Chairman of the Executive Board
of Hannover Re, said his firm supports the push to
develop new covers for emerging and future risks, citing
infectious diseases and cyber as examples.
He noted that traditional market players differ
somewhat to the new capital suppliers, such as hedge
and pension funds, because their ‘long-term orientated
business model provides extensive experience in assessing
current and future risks, in managing risks, and in
creating tailor-made risk transfer solutions’.
He added that new product and distribution
initiatives will become even more important in the
future.
‘NO EXISTENTIAL THREAT’
Fellow keynote speaker Brian Duperreault, Chief
Executive Officer of Hamilton Insurance Group, said the
reinsurance industry faces challenges from the influx of
alternative capital but not an existential threat.
“I don’t think that the threat faced by the industry is
existential. Yes, it is at a critical inflection point, but we
have seen a number of inflection points before and it is
usually a place where real opportunities lie,” he said.
“At the end of the day we are all risk takers. We
place a risk and match it up with the best possible
capital. How well we match risk to capital will be driven
by how well insurers, reinsurers and brokers adapt to the
winds of change. The brush strokes we use to paint the
future of our industry should be big and bold—and I
have no doubt that they will be,” he added.
And so it seems that risk managers and many of
their transfer partners are singing from the same hymn
sheet when it comes to delivering new and innovative
solutions. However, as Ms Graham pointed out,
innovation has been much talked about but a long
time coming. It remains to be seen whether the recent
positive sounds emerging from the risk transfer industry,
spurred by growing competition within their business,
really deliver results for readers of CRE. But perhaps
current insurance market conditions increase the chances
of solutions to new and less tangible risks.
Insurers say capital influx will spur innovation
as risk managers call for new transfer options
[FROM LEFT] Julia Graham, Andrew Kendrick and Paul Hopkin
03_CRE_Y5_09_News.indd 3 4/11/14 16:29:27
4. 4 NEWSFerma
Ben Norris
bnorris@commercialriskeurope.com
[BRUSSELS]—FERMA PLANS TO ARRANGE SPECIFIC
events and sessions on intangible and more difficult to manage
risks to help its members feel more confident in their ability to
mitigate these new and emerging threats.
The focus on areas such as cyber, supply chain and
environmental exposures is in part prompted by the results
of the federation’s 2014 benchmark survey that shows
risk managers are unsatisfied with their current level of
mitigation on many of the leading risks that keep their
CEOs awake at night.
Ferma therefore intends to discuss these key risks with
leading experts and risk managers to identify the best way
to manage such threats. This will then help risk managers
in their discussions with brokers and insurers over more
innovative transfer solutions.
Speaking at their seminar in Brussels last month, leading
Ferma lights said the lack of member satisfaction with risk
mitigation strategies is partly explained by the fact that
risk managers increasingly have to deal with less tangible,
quantifiable and therefore transferable risk.
Respondents to this year’s Ferma benchmark survey
reported a low level of satisfaction with the mitigation of six
of the top ten risks.
These risks are: political/ government intervention;
legal and regulatory changes; compliance with regulation
and legislation; competition; economic conditions; market
strategy and human resources.
For three other of the leading risks—reputation and
brand, planning and execution of strategy and debt/cash
flow—there is a medium level of satisfaction. Only for
quality issues, such as design, safety and liability of products
and services, is satisfaction high.
“We believe the low level of satisfaction is explained by
the fact that, as a profession, we are migrating from tangible
risks towards intangible risks,” said Cristina Martinez, Ferma
board member and Director of Corporate Risk Management,
Campofrio Food Group, at a press conference. These are
simply tougher to manage, she said.
In response Ferma plans to organise targeted events and
in depth sessions on identified hot topics that will involve a
range of risk management and transfer stakeholders. “We are
currently organising meetings to become a strategic partner
with our stakeholders on these issues,” said Ms Martinez.
She and Ferma president Julia Graham explained that
such a session was held on cyber risk during the federation’s
seminar.
It involved the unit head of H4, the trust and security
department of DG Connect at the European Commission,
and a leading figure from Insurance Europe, the insurer
association, to discuss EU data protection initiatives.
Similar meetings will be held on other matters, including
supply chain and environmental exposures, Ferma board
members explained. They hope these will allow risk
managers and their risk transfer partners to deliver more
innovative solutions to troublesome risks.
“So we have been trying to take these intangible threats
and have a voice at the table on these issues in Europe, but
also share what we think in the risk and insurance arena,”
explained Ms Graham.
The Ferma president was keen to point out that this
demands as much input and work from risk managers as
brokers and insurers.
“We need to be more innovative. The survey results are
showing us that we have got to try harder—that is insurers,
brokers and risk managers. It is not just about our risk
transfer partners. We, as risk managers, also have to be able
to ask them the right questions—so it is a shared issue,” she
said.
“More innovative solutions for some of those intangible
areas, either in knowledge, risk transfer or risk management
solutions, is what we are going to be looking for. So it is not
a question of needing another product, it is a question of
what sort of solutions we can work on together. I think we
are heading that way but it has not yet arrived. So we can
have that sort of discussion for all of those intangible areas,”
she continued.
Ms Martinez said that Ferma needs to help risk
professionals become business partners in the strategic
decision-making process.
“We also need to acknowledge that intangible risks are
increasingly on our agendas,” she said. “We need therefore
to be more innovative and that is the reason we believe
our partners, the brokers and insurers, are essential in the
dialogue to find business solutions.”
Ms Martinez said that the increasing number of less
tangible risks facing Ferma members is a reflection of the
ongoing evolution in the role of the risk manager.
Her comments back up findings from our Global and
European Risk Frontiers surveys that suggest a move away
from managing easily transferable asset risks towards
strategic risks.
“New activities that risk managers are gradually being
involved in are business continuity management, the
development and implementation of risk culture across
the organisation and the alignment and integration of risk
management as part of business strategy,” said Ms Martinez.
“Despite this great evolution there is still a long way
ahead of us…we are moving and shifting towards more
intangible types of risks and the resources and tools that
risk professionals need to do their job are consequently
changing,” she added.
Ferma reveals plans to tackle
emerging risks with market
Cristina Martinez
FERMA BENCHMARK:
RMSHOWSGENDERBIAS
[BRUSSELS]—RISK MANAGERS IN LEADERSHIP
roles are overwhelmingly likely to be male (80.5%)
with just 19.5% female, according to Ferma’s latest
benchmark survey results. The average European risk
and insurance manager is a man aged between 45 and
55 and earns in the region of €100,000 and €120,000
a year, Ferma’s first European Risk and Insurance
Report reveals.
Overall 73% of respondents to Ferma’s latest
benchmark survey, upon which the report is based,
were male and 27% female. When added to the figures
on leadership in risk these numbers suggest more
work is needed to drive diversity in risk and insurance
management circles.
Ferma’s president Julia Graham, who has made
diversity a key goal of her term in office, said on the
findings: “Industry could do better and there is certainly
room for improvement. The results endorse Ferma’s
focus on improving gender diversity in our profession.”
The report shows that women make up the
majority of the younger generation of risk managers.
However women lose this position quickly as the
survey findings move through the risk management
career time line. Male risk managers predominate in
leadership roles from the age of 35. Salary levels for
risk managers in leadership positions are also typically
higher for male risk managers than for women.
According to the report the typical risk manager
works at the head office of a very large company. He
has been in his role for between three and 10 years but
in the sector for longer. He is likely to have a specific
qualification in insurance or risk management.
—Ben Norris
Guide launched
on audit and
risk committees
as EU beefs up
reporting rules
Adrian Ladbury
aladbury@commercialriskeurope.com
[BRUSSELS]—THE EUROPEAN RISK
management and audit professions took
a further step forward in efforts to work
more closely to deal with the latest EU
risk reporting rules with the launch of a
new guide on best practice for audit and
risk committees at the Ferma seminar in
Brussels.
As they jointly presented the report,
Julia Graham, President of Ferma, and
Thijs Smit, President of the European
Confederation of Institutes of Internal
Auditing (ECIIA), agreed that there had
been an element of competition between
risk and audit over ownership of risk
management in recent times.
This competition and confusion over
who should be responsible for what had
led to a duplication of effort and waste
of valuable resource, particularly in less
mature organisations, conceded Mr Smit.
“It is a fact that in the past risk
and audit committees have worked
separately on this and about 50% of
the work was doubled. This report will
hopefully help eliminate that,” said Mr
Smit.
“Where companies are in the
development stage there can be a
tendency towards competition between
risk and audit, but as companies move
towards a more mature model they tend
to realise that the two functions are
actually complementary and there is a
place for both. When the two functions
work together they are more effective
and it produces a ‘win win’. If there is
competition then effectiveness is lost for
the company,” he continued.
Commercial Risk Europe’s own
European and Global Risk Frontiers
surveys found that many risk managers
are frustrated by an apparent effort by
audit to take control of risk.
Ms Graham, who is also director of
risk management and insurance at the
global law firm DLA Piper, conceded
that this is a perception among some
risk managers, but added that she hoped
the publication of the report would help
clarify roles and responsibilities so that
such complaints will not be heard going
forward.
“There is still an element of
competition between risk management
and audit for control of risk. This is
exactly what this publication and joint
effort is designed to address. It gives
clear guidance on the responsibilities
and what managers might do to manage
these reporting requirements more
effectively,” said Ms Graham.
“Therefore I welcome this and will
certainly put it on the desk of the chairs
of the risk and audit committees at DLA
Piper as soon as I return to the office.
This is very valid and also shows the
importance of the three lines of defence
approach that I think works and a lot
of regulators do too,” added the Ferma
president.
Julia Graham
03_CRE_Y5_09_News.indd 4 4/11/14 16:29:16
8. 8 BEHIND THE NEWSIRM Report 2014
Tick box compliance no solution to managing
extended enterprise and supply chain risk
Ben Norris
bnorris@commercialriskeurope.com
[LONDON]—INCREASED COMPLIANCE
and a tick box approach to supply
chain risk management will not
prevent scandals and can actually
increase the vulnerability of extended
enterprises, according to a major
new report by the Institute of Risk
Management (IRM) launched last
month.
The Extended Enterprise: Managing
Risk In Complex 21st Century
Organisations report urges companies
to prioritise behavioural and cultural
risk over tick box compliance to
tackle uncertainties in the modern
economy’s complex delivery networks.
The report argues that the
modern commercial obsession with
systems and processes obscures
the real problem in supply chain
and extended enterprise risk
management—a failure to understand
and predict human behaviour and
build trust.
As Peter Neville Lewis, one of the
report’s authors and IRM member,
explained: “Ticking boxes is easy—
and dangerous. Boxes were ticked at
Rana Plaza...and at BP. Developing
a sophisticated understanding of
‘personal risk management’ may be
harder but, as companies as diverse
as John Lewis and Tata Industries
show, it helps create the ethical
behaviour that controls risk across
an organisation—however big or
complex.”
Traditional approaches to supply
chain risk management do not always
bear fruit. For example, figures from
a Chartered Institute of Purchasing
and Supply (CIPS) survey of UK
businesses this August revealed
that nearly 75% of supply chain
professionals admitted they had zero
visibility on the first stages of their
supply chain.
Furthermore, the report points
out that no organisation today has
direct control over every aspect of
its operations or reputation as the
complexity of supply chains and
extended enterprises grows.
TACKLING EXTENDED
ENTERPRISE RISK
The report defines the extended
enterprise as a structure where
a number of organisations come
together in a joint endeavour in order
to achieve outcomes that they could
not have achieved on their own.
“Whilst stronger control may
improve performance in simple
systems, this is not true in complex
systems. A complex system cannot
be controlled. However it can be
influenced. And the more the system
is able to adapt and learn, the
greater the probability that it can be
influenced or nudged into the desired
state. Traditional understanding of
governance and risk management has
been dominated by process thinking,
but in the extended enterprise
we need to give at least as much
attention to relationships, attitudes
and behaviour,” says the IRM in the
report’s executive summary.
Therefore the Extended Enterprise:
Managing Risk In Complex 21st Century
Organisations report highlights
the importance of transition from
risk management of a single
organisation to a coherent
programme that meets the global
and interdependent challenges of
today’s joint endeavours.
Although supply chain risk
management is an important
component, understanding and
managing risk in the extended
enterprise goes further. It looks
beyond supply into the complex
network of relationships that
underpin public and private economic
activity in modern economies, says
the IRM.
It says that risk managers and
their organisations need to understand
their extended enterprises and
manage the risks of the relationships
that bind them. It considers how risk
management approaches should in
turn be adapted.
According to the report’s
editor and IRM’s technical director
Carolyn Williams: “Today’s extended
enterprise environments achieve
amazing outcomes but also display
many of the characteristics of complex
systems, with all the potential for
volatility and uncertainty that
implies. By modelling the extended
enterprise in practice, we provide
risk practitioners with the tools to
start understanding organisational
exposure to extended enterprise
risks—wherever in the chain they are.
By their very nature, complex systems
cannot be managed or controlled, but
they can be influenced, so this will
demand from the future risk manager
new skills in leadership and in the
understanding of culture, ethics and
behaviour.”
Mapping the extended enterprise
should help identify those risks
that need to be communicated, key
points where failure could occur
and highlight differences in culture
and environment that might affect
perceptions of risk, says the report. A
pro-active risk communications plan,
including specific plans for incident
response, should be an essential
element of an extended enterprise risk
programme, it argues.
Modelling and mapping your
extended enterprise helps identify
the ultimate location of risk across
the network. The report outlines the
following benefits to organisations as
a result:
n Gaining a detailed understanding
of the value chain through
the system to help improve
performance and efficiency
n Identifying key points in the
network which control flows of
information, physical goods or
money so that risk and audit
attention can be focused on these
areas
n Helping to identify what can be
controlled, what can be influenced
and what can only be monitored
n Building resilience by identifying
where links are weak, undervalued
or missing
n Allowing for scenario planning
and stress testing by analysing the
effects of taking out elements or
sections and disrupting flows
n Improving the ability to be able to
respond to external and internal
shocks by understanding in
advance what the effects might be
n Improving response times and
reducing disruption costs when
dealing with an incident
n Providing a framework for looking
at the key dynamics of power,
incentives, regulation and values
and ethics.
In the world of the extended
enterprise the role of the board has
to change from one of ‘command
and control’ to one of leadership,
coordination and influence, the report
says.
“Relationship management
and collaborative working across
the extended enterprise become
essential. Boards need to develop
a clear understanding of their
extended enterprise. This includes an
appreciation of the relative power,
incentives, motivations, culture and
ethics and operating conditions of the
key participants,” it explains.
As well as supporting
organisational performance, the report
claims that a better understanding
of risk across the extended
enterprise is vital in tackling wider
problems including slavery, abuse,
environmental damage and dangerous
working conditions.
The report argues that wilful
blindness by organisations to these
issues within their broader networks
is unacceptable. Firms must ask
themselves whether any claims that
they make about their values hold
true across their extended enterprise,
it says.
The report’s executive summary
suggests that risk managers and their
organisations should ask themselves
the following questions about
extended enterprise risk:
n How complex is our business
operating model?
n How extended is our enterprise?
Have we analysed it?
n What additional risks does
complexity pose and how do we
manage them?
n Which key components, processes,
functions or people could, if they
fail, stop us operating?
n What scenarios could trigger a
systemic reaction that could cause
widespread damage?
n Have we thought about the
social dynamics (power, rewards,
regulation and shared ethical
values) across our extended
enterprises? Do we understand
what motivates other key
participants and how they will
behave under stress?
n Have we thought about the risk
appetite and tolerance of members
of the extended enterprise and
how these compare to our own?
n Have we thought about the risk
culture of other participants and
how it compares to our own?
n Do we set an example of ethical,
decent and right-minded
behaviour in order to build trust
and foster these behaviours
through the enterprise?
n Do any claims that we make about
our organisational values hold true
across our extended enterprise?
n How do we satisfy ourselves
that we know what is going
on throughout our extended
enterprise? How do we get helpful
risk information?
n Are appropriate governance
structures in place to ensure that
the likelihood of success in the
joint endeavour is maximised?
n Has the board devoted sufficient
resources to creating and
maintaining an adequate risk
management and assurance
framework that functions across its
extended enterprise?
n Do our senior people have the
right skills and capabilities to lead
a complex extended enterprise?
n Does our extended enterprise
structure support or stifle
innovation?
n Do we give sufficient consideration
to the risks associated with
our relationships? Is there a
senior executive responsible for
relationship management?
n Do we understand how
communications flow through
the extended enterprise, how
perceptions may vary and how this
affects risk management?
n Do we understand our reliance on
outsourced IT and cloud-based
services and the risks that these
may bring to the enterprise?
Please see the next page for an
interview with the IRM’s chairman
Richard Anderson on the report’s key
findings and recommendations.
Carolyn Williams, report editor and IRM’s technical director
08_CRE_Y5_09_BTN.indd 8 4/11/14 16:32:54
9. IRM Report 2014BEHIND THE NEWS 9
Managing risk in the
extended enterprise
‘‘As you start trying to deal with complex
problems you need to bring lots of ideas and
disciplines to the table and you need creativity and
imagination to find the resolution to the problem. So
you cannot just tick the boxes because there are no
longer any boxes to tick.”...’
Richard Anderson
Following the publication of the
Institute of Risk Management’s (IRM)
Extended Enterprise: Managing Risk In
Complex 21st Century Organisations report,
Commercial Risk Europe spoke to Richard Anderson,
the institute’s chairman and principal consultant
at AndersonRisk, for his take on its key findings
and recommendations. BEN NORRIS reports
CRE: What do you see as the key issues, findings and recommendations within the
study/report?
RA: This work reflects on a world in which everything is happening faster, there is
total uncertainty and ambiguity about what is happening and where we are all totally
interconnected—not just from an IT perspective but in terms of how people work together.
If you look at any major project—product design to manufacturing—nobody can do
everything from source to end point on their own any longer. So we are all working in these
extended enterprises in a very complex world and in this publication we at the IRM are
asking what does that look like from a risk management perspective.
We feel the solution is all about understanding the power in relationships and who is
getting what out of these connections, and not just from a financial point of view. Above all
the study stresses the importance of the extent to which there are shared ethical values across
the extended enterprise, because where there aren’t shared ethical values that is typically
where you see the risk explosions. So that is what we are talking about in this report and
how some of the tools and techniques that we are developing need to be spread across this
interconnected world of complexity.
CRE: Who exactly is the report aimed at? Risk professionals or boards?
RA: As with all of our thought leadership it has a joint readership in mind. We always want
to support risk practitioners by providing them with tools, techniques and approaches to
allow them to better do their jobs, but we are always interested in making sure we can
address the needs of the board. At the end of the day if we are not addressing the needs of the
board then the risk manager is going to be wasting his or her time.
CRE: The report stresses the need for organisations to move from enterprise risk
(ERM) management within their own entity to ERM across the extended
enterprise. How does a risk manager go about achieving this?
RA: It is about being able to map the social dynamics. It is also about being able to
understand who is participating in your extended enterprise, how you are connected and
where are the points where problems can occur. It also demands a change in leadership.
Leadership in a hierarchical sense breaks down in an extended enterprise because you don’t
have authority as you cannot know everything that is going on. Therefore you need to
create a followership so people want to follow the general direction of a particular extended
enterprise.
In response risk practitioners have got to be much more agile in a business and strategic
sense. They have got to be really good at the personal connections, building relationships and
making sure the right relationships are working. Risk managers are going to have to adopt a
very open and enquiring mindset. Don’t assume you know it all, you have got to be what I
describe as the disruptive intelligence that pierces perfect place arrogance.
CRE: Is this why the report warns against a reliance on compliance and box ticking to
manage new risks thrown up by extended enterprises and increasingly complex
supply chains?
RA: Absolutely. We are dealing with very complicated ideas and business activities. We know
that a complex problem isn’t susceptible to normal management rules. You can’t have a
single discipline and a simple process and know what will happen. As you start trying to deal
with complex problems you need to bring lots of ideas and disciplines to the table and you
need creativity and imagination to find the resolution to the problem. So you cannot just tick
the boxes because there are no longer any boxes to tick.
Supply chains are a big issue and a tick box mentality can actually hinder supply chain
risk management because it diminishes the importance of relationships. It is very difficult for
the relationships to survive the tick box approach.
CRE: What is the difference between an extended enterprise and a supply chain?
RA: There is a really interesting difference. Supply chain is me, my hauliers, my suppliers and
if something goes wrong it will be bad for me. Whereas the extended enterprise is everybody
that is in my ecosystem and if something goes wrong it is bad for all of us.
CRE: The report promotes managing the behavioural side of risk within the extended
enterprise. Are risk managers currently doing this or is more work needed in
this area?
RA: I am not sure whether they are at the moment. Clearly risk management culture is
a hot topic right now, but my sense is that a lot of the standard questionnaires are rather
stultifying.
From my own perspective, rather than the IRM’s, I have been working on getting to the
real artefacts of culture, which is all about understanding the risk conversations. Culture boils
down to what I say to you, how you respond and whether you are listening to me when I am
telling you about risk or thinking about something else.
There is an approach that I am beginning to develop where you map conversations about
risk between different participants, both within an organisation and across an extended
enterprise. To me that is what we are going to need to start to do. I have used this approach
in a number of organisations and it has shown up those where a strong silo approach exists,
which is disastrous in a complex world. It shows where there isn’t interaction between
departments.
CRE: But isn’t mapping these risk conversations notoriously difficult to achieve in a
quantitative and measurable manner?
RA: Culture and behaviour is hard to measure and pinpoint so it is about getting as much
data as you can and then being able to map that and show others that things are or are not
taking place and working.
I have been working with technologists to facilitate this process. It will start with a
questionnaire that goes out to comparatively few people within an organisation and asks
them who have they been talking to about risk, what subjects have they been discussing and
what is the quality of the conversation. From that we can see whether we have both ends of
the conversation, whether there is agreement on the importance or quality of the conversation
and the number of times the conversation is held. We can then map the conversation by
hierarchy, business unit, function, process and geography to map the quality of conversations
right across an organisation. A lot of people are currently assessing risk culture with tick box
surveys but I am not sure that approach really works.
CRE: What role do boards need to play in managing risk in the extended enterprise?
RA: From within a UK context the new guidance from the Financial Reporting Council is
very clear that it is the board’s responsibility to ensure that the risk culture is appropriate
for the management of risks they wish to take from a strategic perspective. But at the end
of the day regulation isn’t the reason to do it. The reason to do it is to create a long-term,
sustainable organisation. To achieve that you must understand and manage your risks and
one of the most important aspects of that is ensuring your people know how to do so.
CRE: What are the tangible benefits for risk managers who read and take advice from
this report?
RA: They will further their ability to influence boards to think more widely about their scope
of risk management.
08_CRE_Y5_09_BTN.indd 9 5/11/14 08:43:40
10. EUROPEAN RISK FRONTIERS10 Nordic countries 2014
As we wrap up this year’s European Risk Frontiers survey we bring you highlights of our discussions with leading
Nordic risk managers. The survey, sponsored by HDI-Gerling, takes an in-depth look at the world of risk
management, considering the skills needed to thrive in today’s modern economy and the developing role of the
profession. It then tackles hot topics from the world of insurance and risk transfer. BEN NORRIS reports
Extending the skill set
Reporting to
execs a minimum
requirement
I
T IS IMPERATIVE THAT RISK MANAGERS REPORT DIRECTLY TO THE
executive team in order to be effective, with finance and legal the
most likely targets, say Nordic risk managers. However, some say
that in too many organisations such reporting lines still do not exist.
“If the risk manager is not part of the executive management team,
he or she must report to a member of the management team. Who that
person is within your company, whether head of finance or head of
legal, depends on its structure. I report to the head of legal but the most
common reporting line in Sweden is to finance,” said Anders Esbjörnsson,
Ferma board member and Group Risk Manager at construction firm NCC
AB.
“But still too many risk managers do not report to the executive
team—while that is the situation in less than 100% of cases it is still too
few. I think this is something that Ferma is going to address,” he added.
Fredrik Finnman, Swerma’s president and Group Risk and
Insurance Manager at ASSA ABLOY, agreed on the importance of
contact with the executive team as well as the board.
He said that typically in Sweden risk managers do sit and report at
least to group legal or group finance.
“I think both ways are suitable. I haven’t really heard of anybody
being disappointed or lacking the support because they are reporting to
either function,” he said.
He added that managers should have significant contact with the
board because it sets the overall strategy of the organisation for CEOs to
follow. “So direct board contact at least four times a year would be ideal
for the risk manager,” said Mr Finnman.
Lassi Väisänen, Executive Director of Finnish risk management
association FinnRima, argued that reporting to finance is the best option
for risk managers that mainly deal with insurance.
However, for those that deal with wider aspects of risk, reporting to
the chief operating officer or chief strategic officer is preferable, he said.
“The reason being that these two functions are responsible for
strategic planning and execution of selected strategies,” he said. Adding
a risk perspective to these functions allows them to better understand and
analyse the consequences of their decisions, he added.
Susanne Ström, Swerma board member, said that risk managers
need to report to someone in the management team to facilitate direct
contact with, and influence on, key decision makers.
“A risk dialogue with the board and management team is necessary
to get full understanding from both angles,” she said.
MORE WORK NEEDED
TO CONVINCE
BOARDS ABOUT ERM
B
OARDS ARE BETTER AT GRASPING
the value offered by truly active enterprise
risk management (ERM) but there is still
much room for improvement, according to Nordic
risk managers taking part in this year’s European Risk
Frontiers survey.
Some say a lack of direct risk management airtime
with the board is holding back understanding of the
function’s benefits. Breaking down this barrier is not
easy and requires further effort on the part of risk
professionals, they agree.
“I think more and more boards accept the benefits
of risk management. But based on my own experience it
is only when you conduct a quantitative risk assessment
on something tangible and say if we don’t mitigate this
risk this is the exposure and its potential effect on the
group’s profit that boards really understand that they
need to act,” said Fredrik Finnman, Swerma’s president
and Group Risk and Insurance Manager at ASSA
ABLOY.
Lassi Väisänen, Executive Director of Finnish
risk management association FinnRima, said that
boards usually understand the value of traditional risk
management but not necessarily ERM.
“They are quite used to reading top ten risk lists,
information about biggest insurable risks, insurance
covers and so on,” he explained.
Anders Esbjörnsson, Ferma board member and
Group Risk Manager at construction firm NCC AB, said
that lack of direct risk management contact with boards
means they are generally not grasping the value of ERM.
“To fully reach the board the risk manager or CRO
should have direct airtime with board members. If you
report to the executive team and the CEO reports to the
board the risk message can get diluted—the information
will be filtered to the board level. So ultimately getting
the message directly to the board is key and that
requires direct airtime at at least one board meeting
per year. However, I think this rarely happens and is
very unusual. So I would say that boards are not really
grasping the true value of risk management for this very
reason,” he said.
“Because ERM is not usually fully developed boards
pick up bits and pieces of risk information from various
sources. Because the reporting is not streamlined not all
information is getting through in the best way possible,”
he added.
He said to help bridge this gap and better explain
the value of ERM risk professionals need to work on
their communication skills. “You need to be able to
explain complex issues to both the blue-collar worker
and to the board,” he said.
Such communication needs to focus on quantitative
benefits of risk management, said Mr Finnman.
“That starts interest in risk management. It doesn’t
work if you request a meeting with the board and then
just present ISO 31000, for example, as the way forward
because it doesn’t give them something tangible. You
need to say ‘look this is our most important factory and
should it burn down we will see a 15% loss of profit over
an 18-month period’. Then the board understands the
benefit,” he continued.
Smart risk conversations with the board could take
the form of discussions on key strategic decisions, said
Mr Väisänen.
“More practical level advice to help top
management with modern simulation methods to see
what might be the consequences of a decision on the
balance sheet is also advisable,” he said.
However, he warned that risk managers lack such
simulation tools and conceded that other business
functions do not necessarily believe risk management
can provide assistance. “The result is that more adverse
decisions are taking place,” he said.
B
EING ABLE TO SELL AND COMMUNICATE THE
role and benefits of risk management are crucial
qualities for any truly effective risk manager, agreed
risk professionals from the Nordic region taking part
in our European Risk Frontiers survey.
Like many of their colleagues from across Europe that took
part in the survey they also said a thorough understanding of
the business, independence and a strategic overview are valued
commodities.
“Risk management is about communication and the ability to
convince people internally about its benefits and to motivate them,”
said Fredrik Finnman, Swerma’s president and Group Risk and
Insurance Manager at ASSA ABLOY. It requires drive and courage
to convince people internally about risk management, he added.
“So perseverance and the ability to sell what you do are key
qualities of a good risk manager. You need to be able to explain
what risk management is on a basic level to people who are yet to
accept the message,” he said.
Anders Esbjörnsson, Ferma board member and
Group Risk Manager at construction firm NCC
AB, said that traditional risk management skills
will always be needed but that communication and
psychological skills are increasingly important.
“The more experienced and older generation
of risk managers are extremely good technically,
but to be successful today it is more and more
important to be able to communicate and
handle people, both within and outside of the
organisation. These are the most essential new
skills that are needed,” added the Swedish risk
manager. He believes that there is ‘still a long way
to go’ for many risk managers to get up to speed
in these key areas.
Communicating to top management requires
risk managers, many of whom come from the insurance industry,
to move away from overly technical insurance terms and language
in order to be understood by business colleagues, continued the
Swedish risk manager.
“This is a challenge for us as a profession to overcome,” said Mr
Esbjörnsson. “We are working on it but there is a long way to go.”
He also said that modern risk managers must be flexible and
responsive to change in their industry and the risk landscape. “We
must quite quickly learn how to handle these new risks. So we must
not only look at traditional risk, we must keep a close eye on new
developments in risk,” he added.
Fellow participant Lassi Väisänen, Executive Director of Finnish
risk management association FinnRima, agreed that communication
skills and the ability to cooperate across the business and corporate
functions are key skills for risk managers.
He also listed a good understanding of the business, an
ability to foresee, in cooperation with other functions, the biggest
uncertainties and risks and avoiding silos as key to the risk function.
Mr Väisänen added that risk managers must be able to make
clear the likely financial impact of risks on company results.
“You need to be able to transfer risk information in a format
that enables people to see risk impact at profit and loss and balance
sheet levels. You must understand what are the biggest risk areas
from profit and loss and the balance sheet point of view,” he
explained.
Swerma board member Susanne Ström said that successful
risk managers must be independent, accountable, have integrity,
maintain a group-wide perspective, be good communicators and
understand the strategy and risk management connections of an
organisation.
OBTAINING THE SKILL SET
Obtaining the new skills increasingly demanded of risk managers
as they broaden their role is a conundrum for the profession. While
Nordic experts believe part of the answer simply lies in gaining
experience, they recognise the need for better education and
training.
As Mr Esbjörnsson said, experience is
important but there is a need to broaden the
education on offer.
“When you look at risk management
education programmes there is a real need to
add communication and human behaviour
skills to many courses. So we are talking about
learning more on soft details in risk—how
human behaviour affects risk as opposed to just
the technical side of things, such as setting up a
sprinkler to manage fire risk,” he said.
He noted that the European risk management
certification scheme currently being tackled by
Ferma is an important initiative, particularly as it
will require certified risk managers to embark on
continuous professional development.
“You need to have continuous training and education and
attend risk management seminars,” said Mr Esbjörnsson. “If an
insurance risk manager from an insurance background is not active
in attending seminars, courses and training programmes he or she
will lose the skills related to insurance and the very reason they were
hired. The risk management associations must be aware of this and
deliver ongoing learning opportunities to their members. Ferma can
then act in a coordination role and add value,” he suggested.
Mr Finnman argued that business experience and understanding
its core functions are hugely beneficial for risk managers.
“For myself working in a multinational company it helps that I
have experience in functions outside of risk within the same industry
because then I can understand the type of people I am working
with,” he said.
Ms Ström said formal risk management training enables risk
managers to better understand the big picture. But this should be
supplemented by specialist training—in areas such as insurance,
engineering or financials—depending on the specific tasks of
individual risk managers, she added.
Fredrik Finnmann
10_CRE_Y5_09_ERF-Nordics.indd 10 4/11/14 16:33:42
11. To register please go to www.commercialriskeurope.com/RFStockholm
08.15–08.45—REGISTRATION AND COFFEE
08.45–09.00—WELCOME ADDRESSES
Welcome address from Adrian Ladbury, Editor of Commercial Risk Europe and host for the day
Susanne Ström, Vice President, SWERMA and Bror Sandas, Country President, Nordic Countries,
ACE European Group
PART I: THE STATE OF THE CORPORATE INSURANCE MARKET:
CAPACITY, PRICE, EFFICIENCY AND INNOVATION
9.00–9.20—THE BIG PICTURE
Are demand and supply of corporate insurance coverage in equilibrium
and what is the outlook?
Adrian Ladbury reports on the big picture outlook for the insurance market based on meetings
with reinsurers and brokers at the Monte Carlo and Baden-Baden reinsurance meetings, analysis from
the credit rating agencies and equity analysts and meetings with the leading international corporate
insurance groups and brokers at the Ferma Forum in Brussels. He will also report on what risk managers
in Europe and worldwide would like to see their insurers and brokers do to improve the way they
deliver products and services to their customers based on CRE’s annual Risk Frontiers survey.
Do the wants and needs of customers and suppliers match?
9.20–10.05—HOW TO DESIGN THE OPTIMAL MULTINATIONAL PROGRAMME
Michael G Furgueson, President, Global Accounts EMEA, ACE Group
ACE’s latest research reveals that client demand for multinational programmes is set to grow further
in Europe over the next three years. But expanding geographical footprints and divergent regulation
mean there are many complexities that clients, brokers and insurers need to navigate to achieve an
effective programme and good service is becoming even more important to delivering compliance.
Based on the latest developments, this session will highlight a number of specific issues that need
consideration to develop and implement an optimal programme.
10.05–10.35—THE CORPORATE INSURANCE MARKET
IN THE NORDIC REGION
Jacob Schlawitz, CEO, Aon Nordic
■ What capacity is available currently for corporate insurance managers in the Nordic region in the
major lines?
■ How competitive is the market currently and what is the pricing outlook for corporate insurance in
coming renewals, what is driving this pricing and capacity trend?
■ What has the loss history been like over the last 12 months—have loss ratios worsened or improved
and have there been any significant losses?
■ What impact will the arrival of Solvency II have upon the corporate insurance market in Europe and
the Nordic region and how should insurance managers prepare for this?
■ Have there been any significant coverage developments in recent times and what can corporate
customers look out for in future?
■ What new products are customers demanding and what is the market doing about this? Where is
the innovation in critical areas such as cyber, supply chain and environmental?
■ What improved services are demanded and how is the market reacting? How are insurers
improving the way claims are agreed and settled?
■ Is the market happy with the speed and efficiency of premium payment? Are contracts issued the
moment premiums are paid and if not why not?
■ How can cost be cut out of the system without lowering quality standards? Are brokers paid too
much?
■ What could and should the insurance market do to make global programmes more efficient and
assure policyholders that they are compliant?
■ What could and should regulators do to help make this happen?
10.35–10.45 — Q&A WITH SPEAKERS
10.45–11.15 — COFFEE BREAK
PART II: RISK REGULATION AND REPORTING
11.15–11.45—THE EVOLVING EUROPEAN AND SWEDISH REGULATORY LANDSCAPE:
SOLVENCY II, CAPITAL AND REPORTING
RULES AND THE DEATH OF THE CAPTIVE?
■ Is Solvency II on target, how will it be implemented in Sweden and what impact will it have upon
the Swedish insurance market?
■ What impact will Solvency II have upon the captive insurance market? What is the latest guidance
available to captive owners about how the rules need to be implemented?
■ What discussions and consultation have been held with corporate insurance buyers about Solvency
II and captives and how has the regulator attempted to react to their needs?
■ What other rules are on the agenda in Europe and Sweden that the regulator is working on and
which risk and insurance managers need to be aware of and prepare for?
■ What about global programmes? Is there any chance that the International Association of Insurance
Supervisors (IAIS) could deliver a standard that would help create a more level playing field and
give risk managers greater assurance that their programmes are compliant?
■ How could and should captive owners and insurers prepare for the introduction of new accounting
standards for insurance companies?
11.45–12.15—RISK REPORTING, DISCLOSURE AND SANCTIONS
■ What is the point in risk reporting and why has it become such a hot topic in Europe and
internationally?
■ What are the main European and international risk reporting and disclosure rules that European
corporations currently have to adhere to?
■ Are there any new risk reporting, corporate governance and disclosure rules that risk and insurance
managers and the wider insurance market need to be aware of?
■ What will the directive on non-financial reporting require of companies? Why does the EC want to
introduce these new requirements and what will they achieve?
■ How do credit rating agencies use risk reporting? What progress has been made by Standard &
Poor’s on its enterprise risk management rating system and do the other rating agencies have
similar plans to rate the quality and effectiveness of risk management?
12.15–12.30—Q&A
12.30–2.00—LUNCH
PART III: THE EMERGING RISK LANDSCAPE
2.00–2.45—CYBER RISK
Kyle Bryant, Regional Cyber Manager, Continental Europe, ACE Group; Kristoffer Haleen, Client
Advocate, Willis
■ What is cyber risk?
■ How is the risk identified and measured?
■ Who should be responsible for the identification, measurement and management of cyber risk?
■ How could and should risk managers work with other key departments such as IT, marketing and
legal to make sure these risks are effectively managed?
■ What are the latest loss trends?
■ What insurance coverage is currently available for cyber risk, which insurers and reinsurers are
offering the capacity and how is it priced?
■ What are the latest coverage developments and what are the major gaps that risk managers would
like to see filled?
2.45–3.00—Q&A
3.00–3.45—POLITICAL RISK
David McFadyen, Practice Leader Crisis Management, Aon Sweden
■ What is political risk?
■ How are these risks best identified and measured?
■ Who should be responsible for the identification, measurement and management of political risk?
■ How could and should risk managers work with other key departments such as marketing and legal
to make sure these risks are effectively managed?
■ What are the latest loss trends and where are the hotspots that companies need to look out for
when expanding to emerging markets?
■ What insurance coverage is currently available for this market?
■ Which insurers and reinsurers are offering the capacity and how is it priced?
■ What are the latest coverage developments and what are the major gaps that risk managers would
like to see filled?
3.45–4.00—Q&A AND CONCLUDING COMMENTS—CONFERENCE ENDS
SPONSOR:
RiskFrontiers
EMERGING RISK, RISK
REGULATION & MARKET
DYNAMICS IN THE NORDICS
20 NOVEMBER, 2014
CLARION HOTEL, RINGVÄGEN
11_CRE_Y5_09_FAP.indd 11 4/11/14 19:53:08
12. EUROPEAN RISK FRONTIERSNordic countries 201412
ISO 31000:
A balancing act
I
SO 31000 RECEIVED A THUMBS UP
from most Nordic participants of our
European Risk Frontiers survey as a
suitable global risk management standard
because it provides a balance between
generic processes and terms and flexibility to
allow adaptation to individual country and
organisational needs.
According to Lassi Väisänen, Executive
Director of Finnish risk management
association FinnRima, because ISO 31000 is
not currently a certifiable standard it provides
freedom for companies to decide how deeply
and fully they establish and adhere to its
principles.
He said a real strength of ISO 31000
is it encourages risk managers and their
organisations to understand and make use
of the relationships, commonalities and
differences between various risk management
methods, standards and best practices.
“As ISO 31000 itself makes clear...it is
intended to be utilised to harmonise risk
management processes in existing and future
standards. It provides a common approach
in support of standards dealing with specific
risks and/or sectors, and does not replace those
standards,” said Mr Väisänen.
Fredrik Finnman, Swerma’s president and
Group Risk and Insurance Manager at ASSA
ABLOY, said that ISO 31000 is an excellent base
for any industry to establish a risk management
programme. “Certainly you don’t have to adhere
to every detail of ISO 31000 but the framework
Anders Esbjörnsson
and such should definitely be used as an
international standard,” he told CRE.
He pointed out that ISO 31000 is
increasingly gaining recognition as an
international standard and said that Swerma
members now tend to use it and/or COSO.
“It does need to be adapted to the individual
company but to establish a risk management
process internally it is always easier to have
references such as ISO 31000 to explain to
people what it will involve,” he added.
Fellow survey participant Anders
Esbjörnsson, Ferma board member and Group
Risk Manager at construction firm NCC AB, was
less sure about the validity of global standards,
including the potential use of ISO 31000.
“I would say yes and no [for using ISO
31000 as a global standard]. There are things
in common around the world but it is very
hard to standardise the job of risk management.
So having the ISO 31000 is not the be all and
end all solution and will not tell everyone
what a risk manager does or is. However,
there are similarities in risk management
across countries or type of industry, and for
this there must be a standard and guidelines
such as ISO 31000,” he said.
GLOBALPROGRAMMEQUALITY
TOBEDRIVENBYINSURER’S
FOCUSONCOMPLIANCE
Insurers are increasingly focused on the compliance of
multinational programmes, which creates more work for risk
managers, but also peace of mind, a leading Swedish risk
manager taking part in our European Risk Frontiers survey said.
“The eagerness from insurers to comply with all the legal
issues on multinational programmes is definitely increasing. A
few years ago underwriters would say compliance is something
we really should do but were at the same time willing to take
shortcuts to minimise administration, but we don’t hear that
sort of thing anymore. There are no shortcuts when it comes to
compliance, which creates more work for us but delivers peace
of mind and increased quality—we need to comply,” said Anders
Esbjörnsson, Ferma board member and Group Risk Manager at
construction firm
NCC AB.
Fredrik Finnman, Swerma’s president and Group Risk and
Insurance Manager at ASSA ABLOY, added that in his experience
global programmes are working fine. They are increasingly a
business critical solution with claims handling the key focus, he
said.
“It is complicated to set them up but they are business
critical. Claims handling is the most critical part of a global
programme and the main motivation to have a well functioning
multinational insurance solution,” he told CRE.
No end in sight for soft
Scandinavian market
T
HE NORDIC RISK TRANSFER MARKET
remains very soft with new capital only likely
to maintain the status quo or even improve
the environment for buyers, according to Nordic risk
managers.
“Capacity only seems to be going up, there
is definitely enough in the Nordic market, and the
price is decreasing by the year—it is still a very soft
insurance market,” said Fredrik Finnman, Swerma’s
president and Group Risk and Insurance Manager at
ASSA ABLOY.
He said the outlook is set fair for buyers as an
increasing amount of capital from investors continues
to enter the market.
“Investors see the insurance sector as a very
good complement to their portfolio. So you have
insurance-linked securities (ILSs) and cat bonds cropping up. Insurance
companies now have this relatively cheap alternative source to tap into,” he
noted.
Anders Esbjörnsson, Ferma board member and Group Risk Manager
at construction firm NCC AB, said that currently there are many large
insurance players operating in Scandinavia with others increasing their
activity and capacity.
“When I compare the Scandinavian market and prices to the London
market it is very soft over here. Today I do not have
problems with the capacity or pricing. I don’t see
any signs of this changing in the foreseeable future.
Investors face low interest rates and need to put
their money somewhere and non-life insurance is a
good place to invest,” he said.
Lassi Väisänen, Executive Director of Finnish
risk management association FinnRima, painted a
lightly less rosy picture of the local Finnish market.
“Local insurance companies are fulfilling needs for
SMEs, but big enterprises are usually looking for
capacity abroad,” he said.
Mr Finnman also said that new and alternative
capital is providing different types of solutions for
captives and multinational companies in the ILS
market. But he pointed out this market is young
and lacks appetite for the more tricky risks. This could change, however, as
individuals from the insurance sector start to align their skills with capital
market investment, he added.
“The ILS market is particularly focused on short tailed risks, nat cats or
fire risk, but the market is growing for long tailed liability risks also. I have
seen people moving from the insurance sector to the capital markets and
bringing their knowledge of insurance with them. This might increase the
risk appetite for more tricky risks within the capital markets,” he said.
Lassi Väisänen
“ I would say yes and no [for using
ISO 31000 as a global standard].
There are things in common
around the world but it is very
hard to standardise the job of risk
management. So having the ISO 31000
is not the be all and end all solution...”
ANDERS ESBJÖRNSSON
A simple risk transfer equation
R
ISK MANAGERS SHOULD RETAIN RISKS THAT THEY ARE ABLE TO QUANTIFY AND MEASURE WITH THE
resources at their disposal and look to transfer the more complicated and unknown threats, say Nordic
risk managers.
“I have a philosophy within my organisation and my captive that the first task is to understand the risk
ourselves, that is the first criteria we must reach. I would not today accept political risk in the captive, a cyber risk or
even a D&O risk, as in my team I do not have the expertise to fully grasp those risks. So we only accept risks that we
understand,” said Anders Esbjörnsson, Ferma board member and Group Risk Manager at construction firm NCC AB.
Fredrik Finnman, Swerma’s president and Group Risk and Insurance Manager at ASSA ABLOY, agreed that hard
to physically manage and quantify risks lend themselves to risk transfer.
“The risks that should be transferred are those beyond the risk appetite of the company and moreover risks that
are outside the envelope of the business,” he said. “Exposures that are very hard to assess, like supply chain risks
or cyber risks, I think it is a good idea to try and transfer.”
Fellow European Risk Frontiers participant Lassi Väisänen, Executive Director of Finnish risk management
association FinnRima, said that the good news for risk managers is that modern insurance solutions are allowing
companies to transfer more risks.
“There are business needs and insurance solutions available for enterprises to transfer more risks…Modern
insurance solutions will expand the use of insurance to support dynamic business at a new level. These new ideas
will not reduce the meaningfulness of current insurance solutions, but give new possibilities for risk managers to
work more closely with business people,” he said.
10_CRE_Y5_09_ERF-Nordics.indd 12 5/11/14 08:39:02
13. Onwards
upwards
ADRIAN LADBURY (AL): WHAT IS THE BACKGROUND TO
BROKERSLINK? HOW AND WHY DID YOU EVOLVE SO
RAPIDLY WITHOUT EXTERNAL FUNDING?
JOSÉ MANUEL DIAS DA FONSECA (JMF): BrokersLink was born in
Portugal in July 2004, formed by MDS in Portugal, Artai
in Spain, Pérouse, First Assur of France and Lazam-MDS in
Brazil. The vision for BrokersLink is to provide outstanding
service to clients worldwide, responding to the demands of
an increasingly competitive and global market. It started as
a small group of members who had to compete with the big
guys. One of the most important competitive edges was to be
global to help service our Portuguese customers’ increasingly
international needs. We also had a rising number of European
customers outside of Portugal in France and other countries. So
we needed alternatives. To start with the group of four partners
were mainly focused on Europe and Brazil but the direction was
clearly going to be global from the start.
AL: HOW DID YOU BECOME TRULY GLOBAL?
JMF: In November 2007 we officially created the Associação
BrokersLink (ABL) to become a key player in the global
insurance market and an alternative to the large global brokers.
At that point BrokersLink gathered some 40 independent
brokers across over 50 countries and managed more than an
aggregated $4bn in premium.
Then we met other similar brokers in Asia and Latin
America and began to focus on these markets. In November
2008 PanAsian Alliance, the network of Asian brokers
that was created in 2005, and Alinter, the South American
network of independent brokers formed in 2000, made the
decision to operate under the single BrokersLink brand as
one global network. As I travelled around the world and met
other independent brokers I found that we had similar DNA
wherever we were. In 2009 leading US independent broker
Frank Crystal joined the network and we went truly global.
We officially relaunched with a new brand identity and
held our first international conference in Hong Kong.
AL: WHAT ABOUT OTHER SERVICES? RISK MANAGERS WITH CROSS-
BORDER EXPOSURES AND COVERAGE REQUIREMENTS DEMAND MORE
THAN JUST TRANSACTIONAL PLACEMENT SERVICES, THEY ALSO WANT
SERVICES IN OTHER RISK-RELATED AREAS. HOW DO YOU DELIVER THIS?
JMF: We expanded the membership to include other key
service providers to deliver just this for customers. We now
have a formal relationship with some 15 expert service
providers including AIR Worldwide, the catastrophe
modelling firm, American Appraisal, the global
loss adjusting firm, Herco Risk Consulting,
which is part of the MDS Group, Safeonline,
the cyber security experts, and Towers Watson,
the human capital and risk consulting firm. We
even now work with a US law firm and so have a great range
of expert advisory firms. This is another thing that makes us
different to other broker networks. We are not just defending
our business by using opportunistic tactics. We are looking for
new business and have very aggressive DNA throughout
the network.
AL: WHY DID YOU DECIDE TO INCORPORATE
THE NETWORK? HOW DOES THIS HELP
IMPROVE THE OFFERING FOR CUSTOMERS AND WIN NEW BUSINESS?
JMF: We made a very important decision at the end of 2013
to transform BrokersLink from a not-for-profit commercial
partnership into a formal, profit-oriented operation. We have
created a holding company and incorporated in Zurich and will
launch the stock offer to all members at the end of the year. The
objective is to create a new model for the market, creating a
unique alternative. We are different as the model does not exist
anywhere else. We are raising capital to fund further investment
that is focused on a significant new business development push,
a central management structure and investment in IT, such as
a global software system. We also need to invest in branding
and PR. So this will happen in the first half of 2015 and we will
probably end up with 40 to 60 shareholders.
AL: IS THERE NOT A DANGER THAT THE NEW STRUCTURE WILL DAMAGE
WHAT HAS SO FAR BEEN A VERY SUCCESSFUL PARTNERSHIP SYSTEM?
WILL IT STIFLE THE DYNAMISM AND FOCUS ON CUSTOMER CARE THAT
THE INDEPENDENT NETWORK STRUCTURE FOSTERS?
JMF: We do not want to kill independence and the
entrepreneurial philosophy. Our members are strong,
dynamic and business- oriented companies. There is
a great culture within the network. Over the
last 10 years or so we have worked hard
to ensure that all members are
very motivated to work together. The success of BrokersLink is
largely based on the human relationship basis of the network
and the level of knowledge. Everybody knows each other and
there is a big alignment of culture. One important benefit of
incorporation and raising funds through the stock offer is to
invest in IT. This is so important nowadays, especially for global
customers. If we retain the close relationships with each other
and customers and this is supported by the best possible IT
infrastructure then we have the best of both worlds.
AL: WHAT ABOUT YOUR RELATIONSHIP WITH THE INSURANCE MARKET?
HOW DOES THIS WORK? WHAT ADVANTAGES DO YOU BELIEVE YOU HAVE
OVER YOUR BIG RIVALS SUCH AS MARSH, AON AND WILLIS?
JMF: BrokersLink partners with many insurance market leaders
around the world. We manage a significant premium volume
with major insurers and this provides the leverage the network
needs to deliver competitive and quality insurance programmes
to clients.
The network has strong partnerships with AIG, Zurich and
XL Group. We also have a strong relationship with CooperGay,
one of the world’s leading wholesale and reinsurance brokers
[MDS owns 10% of CooperGay]. These partners work actively
to support BrokersLink members’ development efforts with
training programmes, international database access and
co-branded products. These partnerships are crucial to the
development of the global alliance and the goal is to establish a
prosperous collaboration for all involved parties.
But this club is not closed. Many other insurance brokers
and captive in-house brokers also use BrokersLink as a platform
to provide global risk management and insurance brokerage
services to their multinational clients. At our recent conference
in Venice there was a record turnout of over 270 members from
over 70 countries. Our keynote speaker was Mike McGavick,
CEO of XL. The big insurers take us seriously.
AL: SO PRESUMING THE STOCK OFFER IS SUCCESSFUL
WHAT IS NEXT ON THE AGENDA FOR BROKERSLINK?
WHAT WILL DIFFERENTIATE YOU FROM THE BIG LISTED
GLOBAL BROKERS SUCH AS AON, MARSH AND WILLIS AND
THE OTHER BROKER NETWORKS?
JMF: The focus for the next two years will be to develop a
continued stream of new business. We are different because the
global brokers have offices worldwide but they are vertically
structured. The other broking networks are completely
horizontal and essentially designed to protect their own
business. We are something in the middle as we retain
our entrepreneurial spirit and independence but
with shareholders we will also create a vertical
alignment and an even greater commitment
to the cause than before. I believe the mix
between the two will help develop new
business but at the same time retain the service culture,
close relationships with customers and, of course, the local
knowledge that is so key in the global insurance business. We
have a very regional board with directors from each continent
and the whole structure is built from bottom to top which
means people feel very integrated. This is very clear when you
attend one of our events. We are very
close and contact between different
Focus on BrokersLinkBEHIND THE NEWS 13
BrokersLink was created in 2004 as a partnership between four independent brokers in Portugal, France, Spain and
Brazil to meet the increasingly international risk and insurance needs of their customers.Ten years later the network
has over 60 broker members and 15 affiliated service providers. It is present in over 80 countries, boasts over 300
offices worldwide staffed by more than 7,000 risk and insurance professionals and handles some $15bn in annual
premium for customers.At its recent annual member conference inVenice, Italy, José Manuel Dias da Fonseca, the
network’s chairman and CEO of leading member MDS of Portugal, confirmed that the network had incorporated
in Zurich, Switzerland and would launch a stock offer to members in the first half of next year. Commercial Risk
Europe editor Adrian Ladbury asked Mr Fonseca why the network had decided to take this bold move and
how it would help further cement BrokersLink as a credible alternative to the established listed global brokers
At that point BrokersLink gathered some 40 independent
brokers across over 50 countries and managed more than an
Then we met other similar brokers in Asia and Latin
America and began to focus on these markets. In November
2008 PanAsian Alliance, the network of Asian brokers
that was created in 2005, and Alinter, the South American
network of independent brokers formed in 2000, made the
decision to operate under the single BrokersLink brand as
one global network. As I travelled around the world and met
other independent brokers I found that we had similar DNA
wherever we were. In 2009 leading US independent broker
Frank Crystal joined the network and we went truly global.
We officially relaunched with a new brand identity and
held our first international conference in Hong Kong.
WHAT ABOUT OTHER SERVICES? RISK MANAGERS WITH CROSS-
BORDER EXPOSURES AND COVERAGE REQUIREMENTS DEMAND MORE
THAN JUST TRANSACTIONAL PLACEMENT SERVICES, THEY ALSO WANT
SERVICES IN OTHER RISK-RELATED AREAS. HOW DO YOU DELIVER THIS?
We expanded the membership to include other key
service providers to deliver just this for customers. We now
have a formal relationship with some 15 expert service
providers including AIR Worldwide, the catastrophe
modelling firm, American Appraisal, the global
which is part of the MDS Group, Safeonline,
the cyber security experts, and Towers Watson,
the human capital and risk consulting firm. We
even now work with a US law firm and so have a great range
of expert advisory firms. This is another thing that makes us
different to other broker networks. We are not just defending
our business by using opportunistic tactics. We are looking for
new business and have very aggressive DNA throughout
a great culture within the network. Over the
last 10 years or so we have worked hard
to ensure that all members are
training programmes, international database access and
co-branded products. These partnerships are crucial to the
development of the global alliance and the goal is to establish a
prosperous collaboration for all involved parties.
But this club is not closed. Many other insurance brokers
and captive in-house brokers also use BrokersLink as a platform
to provide global risk management and insurance brokerage
services to their multinational clients. At our recent conference
in Venice there was a record turnout of over 270 members from
over 70 countries. Our keynote speaker was Mike McGavick,
CEO of XL. The big insurers take us seriously.
AL: SO PRESUMING THE STOCK OFFER IS SUCCESSFUL
WHAT IS NEXT ON THE AGENDA FOR BROKERSLINK?
WHAT WILL DIFFERENTIATE YOU FROM THE BIG LISTED
GLOBAL BROKERS SUCH AS AON, MARSH AND WILLIS AND
THE OTHER BROKER NETWORKS?
JMF: The focus for the next two years will be to develop a
continued stream of new business. We are different because the
global brokers have offices worldwide but they are vertically
structured. The other broking networks are completely
horizontal and essentially designed to protect their own
business. We are something in the middle as we retain
our entrepreneurial spirit and independence but
with shareholders we will also create a vertical
alignment and an even greater commitment
to the cause than before. I believe the mix
between the two will help develop new
business but at the same time retain the service culture,
close relationships with customers and, of course, the local
knowledge that is so key in the global insurance business. We
have a very regional board with directors from each continent
and the whole structure is built from bottom to top which
means people feel very integrated. This is very clear when you
CONTINUED ON NEXT PAGE
13_CRE_Y5_09_BTN.indd 13 4/11/14 18:53:08
![Adrian Ladbury
aladbury@commercialriskeurope.com
[LONDON]—EUROPEAN AND INTERNATIONAL
risk managers will be delighted to see little
evidence of an overall market hardening
in the global corporate insurance market
provided by the first slew of third quarter
results from leading international insurers
and specialty carriers.
The big US insurers and Bermuda
market players (including those that were
born in Bermuda but relocated to Ireland
or Switzerland) report first and did so at the
end of October.
Almost all reported healthy profits and
decent combined ratios boosted by relatively
low losses. Investment returns remain low
by historical standards but are showing signs
of improvement.
A number of insurers again reported
reserve releases to boost their combined
ratios.
There therefore still seems little threat
of a generally hardening market driven by
the need for reserve additions because of
consistently underpriced liability business.
Though this will be dependent upon fiscal
policy that can change rapidly.
Premium growth was not strong in most
cases as insurers generally reported further
reductions and flat rates at best for most of
the main lines. The main exceptions were
specialty lines that have suffered significant
losses such as the aviation market.
Generally speaking CEOs talked about
disciplined underwriting in select markets
in which they specialise.
This means that insurers are investing
in specialist skills and services to win new
business, which again can only be good news
for risk managers.
The most exciting markets for growth
remain so-called emerging regions such as
Asia and Latin America where underlying
economic growth is higher than mature
markets and insurance penetration rates are
rising for personal and business insurance.
The fact that the big corporate insurers
continue to invest in these regions for
growth is again good news for risk managers
who seek multinational insurance solutions
as their companies also expand to such
regions.
BRAZILIAN BACKING
The news that ACE, for example, has been
given regulatory approval to complete a
Brazilian acquisition and become the leading
commercial insurer in that fast-growing
nation can only be good news for corporate
insurance buyers.
The CEOs did their best to talk up the
market as ever. But it was interesting to note
that a number of those insurers that have
reported returned significant slugs of capital
to investors, suggesting again that they are
not that bullish about market conditions
going forward.
The reinsurance market remains
highly competitive and awash with capital
provided by capital market investors as they
seek returns in what remains a low yield
environment worldwide.
It may be too early for the capital markets
to consider trying their luck in the large
corporate sector through direct risk transfer
solutions for captives, for example.
But the continued glut of capacity at
the top end of the market will surely entice
the big reinsurers to continue their recent
strategy of expansion downwards into the
corporate insurance market.
AIG reported net income of $2.2bn for
the third quarter of 2014, up 1% on the prior
year quarter. After tax operating income was
$1.7bn, up 23% from $1.4bn in 2013.
AIG’s property casualty business
increased pre-tax operating income by 2%
to $1.1bn. Its third quarter 2014 combined
ratio was 102%, a 0.4 point increase from
the prior-year quarter. This was inflated by
AIG bucking the general trend and taking
a $227m reserve addition, primarily in the
primary casualty business.
AIG NUMBERS
These increases were partially offset by a
$23m decrease in commercial insurance
severe losses to $188m. Catastrophe losses
were $284m, compared to $222m in the
third quarter of 2013.
The company also said that it had
authorised additional share repurchases of
$1.5bn. It has bought back $3.4bn of shares
during the year so far.
“The solid third quarter results were
driven by consistent performance across
our businesses,” said Peter Hancock, AIG
PresidentandChiefExecutiveOfficer.“While
no one quarter is a trend, our risk-adjusted
return focus could be seen in various metrics
Corporate insurance buyers can expect
relaxed renewals based on initial Q3 data
FOCUS ON BROKERSLINK:
BrokersLink is a network of over 60 brokers
and 15 providers. It operates in 80 countries,
boasts over 300 offices worldwide staffed by
more than 7,000 risk professionals....... p13-14
Commercial Risk EuropeEUROPEAN INSURANCE & RISK MANAGEMENT NEWS
www.commercialriskeurope.com
VOLUME 5/ ISSUE 09/ NOVEMBER 2014
REPORT: MANAGING RISK IN COMPLEX ORGANISATIONS
A major new report by the Institute of Risk Management looks
at how increased compliance and a tick box approach to supply
chain risk management will not prevent scandals and can actually
increase vulnerability of extended enterprises.................................. p8-9
Commercial Risk Europe
Ben Norris
bnorris@commercialriskeurope.com
[ L O N D O N ] — E X P E R T S H AV E
welcomed new guidance from the
Financial Reporting Council (FRC) on
risk management, internal control and
related financial and business reporting
that forms part of the updated UK
Corporate Governance Code (the code)
as a major boost for risk management.
The new guidance makes clear
that while risk managers may
have day-to-day responsibility for
implementation and management, it
is the responsibility of boards to ensure
that appropriate risk policies are in
place, their understanding of risk is
high, that risks are maintained within
tolerable levels and that risk mitigation
is sufficient.
To perform this task UK boards
are going to have to rely on their risk
management teams to provide them
with the appropriate information, say
experts. According to leading bodies
including Airmic and the IRM this
presents a real opportunity for the
risk community to add value and
will inevitably raise the profile of the
profession.
GOOD GUIDE
Although the guidance is aimed at
listed UK companies bound to follow
the code all other types of organisations
and their risk managers are advised to
implement its recommendations.
The FRC updated the UK
Corporate Governance Code and
published the accompanying Guidance
On Risk Management And Internal
Control And Related Financial And
Business Reporting on 17 September.
The revised code and guidance applies
to accounting periods beginning on or
after 1 October, 2014.
The changes to the code include
the need for boards to include a
forward-looking ‘viability statement’
in their strategic report to investors
as well as develop new approaches to
remuneration and, crucially for readers
of CRE, risk management and internal
control.
The code will continue to operate
on a ‘comply or explain’ basis.
FRC.
New guidance from FRC is a shot
in the arm for risk management
FRC: Turn to P16
RESULTS.
RESULTS: Turn to P18
Peter Hancock
Stuart Collins
news@commercialriskeurope.com
[LONDON]—MULTINATIONAL COMP-
aniesarebeingurgedtochecksupplychains
and insurance cover as the Ebola outbreak
in west Africa continues to pose
a risk.
WORST IN HISTORY
According to the World Health
Organisation (WHO), at the end of
October there had been almost 5,000
deaths from almost 14,000 cases of
the Ebola outbreak. The vast majority
of cases have occurred in Liberia, Sierra
Leone and Guinea. Spain, the US,
Senegal, Nigeria and most recently
Mali have experienced isolated cases.
If left unchecked the Ebola disease
outbreak in west Africa has the pot-
ential to be the most deadly infectious
disease event since the 1918 flu
pandemic, according to modelling
carried out by RMS. The catastrophe
modelling firm estimates that the
current outbreak will worsen and could
reach as many as 1,400 new cases per
day within a month.
Despite international assistance
now arriving in the worst affected
countries, the outbreak is expected
to worsen—with the total number of
new cases approximately doubling each
month—until a tipping point is reached
EBOLA: Turn to P16
EBOLA.
Multinationals urged to
check supply chains and
coverage on Ebola threat
Corporate insurance buyers can expect
Commercial Risk EuropeEUROPEAN INSURANCE & RISK MANAGEMENT NEWS
Commercial Risk EuropeEUROPEAN INSURANCE & RISK MANAGEMENT NEWS
Commercial Risk Europe
p8-9
01_CRE_Y5_09_News.indd 1 12/11/14 16:17:51](https://image.slidesharecdn.com/55f9fd07-0a32-4d9a-b5b0-9ae625352365-150903101253-lva1-app6892/85/commercial-risk-europe-p1-p16-1-320.jpg)
