The big debate: the changing face of risk management

Risk management is set to increase in importance as trends such as globalisation, the interconnectivity of risks and advancement in technology, as well as the financial crisis, have placed greater onus on these professionals to ensure business resilience in a complex and evolving global marketplace.

This will form the basis of today’s profession panel discussion, which takes place from 11:30 to 12:30. Moderated by Cathy Smith, co-director of Speak Easy, the panel will include:

• Alexander Mahnke, chief executive (insurance) at Siemens and president of German risk management association, DVS
• David Batchelor, president of international division at Marsh
• Rick Roberts, director of risk management and employee benefits at Ensign-Bickford Industries
• Thomas Hürlimann, chief executive, global corporate, Zurich.

They will consider how the risk manager’s role has changed and what is to be expected from the risk community in the future.

Speaking to StrategicRISK before the start of the debate, Hürlimann warns that risk is growing faster than global GDP. “This makes the risk manager’s role more complex and challenging,” he says. “At the same time, it makes [the role] more important.

“New risks arising from technological advancements and changes that are affecting society, such as an ageing workforce in mature economies, further increases the complexity of this role.”

Three further risk trends are changing the risk manager’s role, he says. “First, we see an increase in urbanisation, which leads to a further concentration of risk. Second, there is an increase in frequency, and especially severity, of natural catastrophes. This, taken together with the urbanisation and the fact that many countries are in flood zones, on seismic fault lines and in other areas prone to catastrophes, means we already face a rapid increase in risk.

“Add a third factor – increasing interconnectivity – and the combined impact is that we are seeing risk growing faster than global GDP. This means the role of the risk manager is becoming not only more complex but also more important.

“The modern risk manager must manage many different complex country risks on a global scale. These risks are often interconnected and span the full spectrum, from property, liability and directors and officers liability (D&O) insurance to employee benefit risks. The risk manager’s role is thus a very challenging one.”

Emerging threats

Emerging risks have also placed a greater importance on risk manage- ment, particularly cyber threats. Marsh’s Batchelor says: “Cyber risk is perhaps the most prominent of all the emerging risks faced by businesses today. The trouble with cyber risk is that few firms are used to dealing with it. With the exception of organisations such as banks, utilities and other critical infrastructure, operational risk for many firms is managed well below board level.

“Cyber risk is changing this by bringing tail risk – a risk that provokes acute, public and potentially catastrophic damage, whether to data, reputation, property or the ability to trade – to any firm, large or small, regional or international. As a result, cyber risk is making firms think about their ability to avoid and withstand the impact of a substantial cyber incident.

“In our globalised economy cyber risk and other incidents often have repercussions for global supply chains that can be felt on the other side of the world. Building resilience is key in today’s just-in-time global supply chain. The businesses best able to do this will understand where critical points of failure sit, allowing informed decisions on the risks they are pre- pared to take, as well as those they know they must face.”

He adds: “Organisations need to put in place risk management disciplines that are fit for the purpose of protecting them from and coping with fast-moving threats to their viability.

That goes well beyond the historic expectations on risk management for many firms and requires a significant elevation and investment in risk.”

Not just insurance

Mahnke observes that having insurance expertise is no longer sufficient and there is more pressure on risk managers to take a holistic view of the global risk landscape.

He says: “Looking at the role from an evolutionary manner, some decades ago it was sufficient to be an expert in insurance technique. Now, depending on the size of the company, businesses need a good risk and insurance team, which encompasses resources in areas such as engineering, IT, law and, of course, insurance techniques. When I say team, this can also include support from external resources.

“In order to understand the risk, to make it underwritable and to understand where certain trends and claims come from, and then explain this to loss adjusters, you need the right expertise.


“Companies need to combine insurance with the technical risk expertise. I keep telling my own team, we are not here because we need to be the best insurance experts in the world, but because we are the necessary link between our company’s risk exposures and whoever is underwriting and potentially taking the risk. Of course, a strong technical expertise always is and will remain a precondition to be able doing our job.”

He adds: “Businesses need a wider breadth but also a deeper and more profound knowledge in many areas, so it is important to establish a team with the right people, which brings me to my favourite topic: talent acquisition and training.”

But when it comes to talent management, the risk and insurance industry faces challenges, often with insurers, brokers and risk managers admitting that the sector has an ‘image problem’. Many view insurance – and related roles – as ‘dull’.

The talent war

Mahnke’s advice is to promote the company’s brand as well as the jobs in risk management – and increase competition for graduates among insurers and brokers.

“It is not the best approach to wait for talented graduates to knock on the door and ask for a job. Companies really need to compete for the best talent before other companies get to them first.

“In insurance and risk management, we are competing with brokers and insurers to a certain degree. In the past, insurers and brokers educated talent for us. Traditionally, these professionals would consider a career in risk management after working as an insurer or broker for some years. But risk management should be among the first choices.

“I started my career at Siemens before becoming a broker, so my first job was being part of insurance risk management team. We need this to be the rule rather than the exception. [To do this, we need to] create and maintain a high profile as an employer.