Bombardier’s Malwine Braunwarth: Germany’s top risks

What are the top risks facing business in Germany?

Germany’s population is declining but at the same time, people are living longer, which means the average age of the country’s population is on the rise. Experts predict that this will have a significant effect on the society and will place an enormous burden on the country’s social security system.

Businesses will suffer from a shortage of young and skilled talent, especially the insurance sector, which is already suffering from an ageing workforce. The insurance industry needs to step up efforts to attract talent. Risk managers, insurers and related associations such as DVS need to have a strong focus on talent management.

What can insurers do to help attract talent?

The insurance industry needs to promote insurance and risk management in a positive way, to ensure young students are fully aware of the exciting careers available. The jobs are interesting, diverse and challenging, and offer candidates opportunities to collaborate at all levels of a company. In insurance, young talent will have the chance to think and act global. After all, insurance is the backbone of most companies worldwide.

In the near future, pure Germany-based companies will become global and therefore local companies need to be able to adapt to worldwide business cultures. The scarcity of talent is a topic becoming more. In this context, encouraging diversity is vital. Diversity will enable companies to recruit from a wider pool of talent irrespective of gender, race, ethnicity, religion, and is key to tackling skills shortage in Germany and worldwide.

What’s the next biggest risk?

The second challenge for Germany is competition. Globalisation has increased competition and now German companies are in competing, not only with European companies but with international growth markets.

Three key thoughts come to mind but are simplified; reducing it to a line of arguments like

- Germany is no longer competitive due to the increasing globalization;

- In order to become competitive again, primarily labour costs must be reduced;

- If this is denied, it will become difficult to recruit and companies will have to make up for the shortfall in talent by deploying efficient technology, which is one of the reasons the unemployment rate in the country is growing.

While structural weaknesses, like bureaucratic costs or duration of authorisation procedures, cultural openness and accompanied opportunities are still too often overlooked.

From my standpoint the increased competition as a result of globalisation is less risk it is more a challenging opportunity

Do you have a third risk?

Can a risk manager really judge what the top risks are? I doubt it and would rather avoid such terms. Some risks will feature at the top of surveys and polls. Take the Japanese tsunami in 2011 as an example. After the incident, natural catastrophes and supply chain risks topped several polls of the biggest threats to business. One of the reasons these risk featured so high was because of global media coverage.

However, risk managers should not focus too much on the risks that are currently in the news or classified as “modern” such as cyber or reputational risk, or as in the case of the Japanese tsunami, supply chain and nat cats. Instead, risk managers need to take a holistic view and consider the correlations between different risks.

In a globalised world, a flood in Asia could have fatal consequences on businesses further afield, for instance in the US. In this simple example, risk managers will have to deal with several risks, natural hazard, supply chain and business interruption. A crisis may start with a single event in a single location but the consequences may be that of a domino-effect, whereby several risks are triggered.

This domino effect could be worsened with social media. Information about the risk and consequences a company has suffered – a cyber attack causing data protection beach or loss, for example – can be spread globally in a matter of seconds, resulting in huge reputational repercussions. In the digital age, this risk will become more relevant for businesses.

How are risk managers dealing with these risks?

Risk managers do not act in isolation, but in close co-operation with internal departments. We liaise with other external functions and especially with traditional risks there is a comprehensive approach with our industrial property insurance carriers focusing on risk identification and assessment, risk avoidance and reduction and risk acceptance and transfer of risk, not being kept under the company captive to the professional insurance market.

Malwine Braunwarth, head of risk engineering - global risk management & insurance at Bombardier