We need new answers to new risks

Risk managers must embrace change and develop new answers to new risks, says John Ludlow, chief executive at Airmic.

Opening Airmic’s annual conference in Harrogate, Ludlow says: “Our jobs as risk professionals is not to predict what will happen. Our job is to ensure we are positioned to take advantage of the exciting opportunities opening up in this new world.

“Successful boards realise that constant reinvention is vital for success.

“The best board realise that risk governance must be at the heart of the process and it is the job of everyone in this room to help org recognise this and develop good practices.”

Indeed, boards have a vital role to play and risk managers must support the top table. “As a profession we must do more to bring risk management into the boardroom,” he says. Risk management is “not just the tick box compliance but become a strategic partner.”

Indeed, facing the changes of the world head-on is the theme of this year’s conference, New World, New Solutions and Airmic is keen to ensure that its members have the competencies, networks and tools to deal with modern challenges such as digital disruption and globalisation.

It is the latter trend that Ludlow believes is having the most transformative effect on business and risk managers.

Speaking to StrategicRISK moments before his opening speech in Harrogate on Monday 3 June, he says: “It used to be the case that if you had a good idea in a small market, you could only go so far off the back of that idea. But now, you’re not constrained by only being in a small market or even by being in America – you have the world to change, and in that sort of world the winner takes everything.”

“However, the other side of this is that the opportunity only lasts for a moment in time because the globalised world is so much more competitive. Whereas in in the old days, your businesses might last 100 years. I’m not entirely sure that models last anything like that these days.

“That’s why we talk about repurposing companies – it’s no longer enough just having one purpose to last for decades, businesses have to constantly reinvent themselves to make sure that they are relevant in the new world.”

Ludlow points out that the business landscape is further revolutionised by social media, which takes power from companies and puts it squarely in the hands of customers and other stakeholders. It also means that nontangible threats such as cyber and reputation are increasingly critical.

REINVENT YOURSELF

He says: “In a global environment, trust is incredibly important. Companies are no longer just talking about good financial capital they’re also talking about trust in their brands and that’s unleashing a whole new field of risk management ready to join the old domains of regulatory, financial and operational risks.”

This means that risk managers must also reinvent themselves to meet the new challenges facing corporates.

“Be open to change, embrace it,” says Ludlow. “Work collaboratively to find new solutions. You all need to work together, so the insurance manager must work with the risk manager, who must work with the c-suite and other risk owners in the business.”

Breaking down silos is a key theme in Harrogate and Ludlow also highlights the importance of working closely with other departments, functions and across the value chain.

BREAK DOWN SILOS

Some of these relationships will not be new, but in the changing world, it is the job of the risk manager to work with all of these job functions to create a holistic view of risk that can be presented to senior board members in a company.

He says: “Risk managers are having to work in very different ways now. One of the things that drives this is that as the maturity of risk management is improving, it stops being a reaction to crisis and starts being more strategic.

“When risk management first became a profession, it attracted a lot of technical people but now we are reaching a stage where the culture is also more about collaboration and business partnering, championing and leading, we therefore need additional competencies.

“You need risk managers that can properly act as a ‘business partner’, which requires very different leadership skills to succeed. And now that risk is moving much higher up the corporate agenda from an operational function to a strategic one, the list of skills has evolved even further.”

Ludlow says that as risk managers move up this maturity curve, insurers will need to evolve too - particularly when it comes to products and services that manage non-tangible risks.

He concludes: “In the corporate solution space, insurers and brokers need to build more expertise and offer that as part of the package to the insured.

“In a more fast-paced business environment, you can’t afford to wait to face risks and learn from your own experiences, you also need to learn lessons from your industry, and so risk managers and insurers are going to have to work more closely to identify the risks and come up with new, bespoke solutions.

“At the top end of the insurance market we need risk specific technical credibility and expertise and true engagement between parties - it can’t be a transactional relationship anymore – it must be strategic.”