FORUM 2013 Difference in culture - Asia

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Information about FORUM 2013 Difference in culture - Asia

Published on February 18, 2014

Author: FermaForum


“The impact of differences in culture on the risk manager’s job” Singapore September 2013

1. Culture of loss prevention in Asia ? In light of the many catastrophes that have occurred in the region, certain parts of Asia have opened their eyes to the great importance and realise the need for this. However in general compared with the Western world, Asia still has much to improve on this aspect. Asia is diverse so you have countries such as Singapore, Australia and Japan etc. who are more sophisticated and focused on loss prevention measures as opposed to the other developing or emerging countries. But this is changing although at different paces in different countries but the positive aspect is that its improving. Pan-Asian Risk & Insurance Association 2

2. Are Asian companies prepared to consider supply chain risks? Still very new for most of the organizations and applicable to large established companies in Asia and those that have the resources to do so But then again the million dollar question is to what extent? What is better…having one critical supplier to address the increasing pressures of cost cutting measures or spreading the risk between 2 or 3 suppliers, which is a more expensive option? A bit of catch 22 there. Many organisations have and are considering this inevitably as the present business models adopted involves greater proportion of outsourcing so the reliance on suppliers have undoubtedly grown exponentially. Some key measures observed include ensuring identified key suppliers have key control measures in place comparable to that observed by the company using them (such as Business Continuity, Quality Control, Work ethics etc.) as one of the driving factor is potential reputational impact. . Pan-Asian Risk & Insurance Association 3

3.Reputation of the insurance tools among the Asian community of risk managers? Transactional or Strategic Predominantly transactional risk management, but at least this is better than no risk management at all. Pockets of strategic risk management, and they are slowly expanding as more people get exposed to and caught up in the challenges and benefits brought about by a good strategic risk management regime. Gradual trickle of experienced risk management practitioners coming in from overseas as more of the larger companies set up or increase their presence. But not enough understanding or realisation of the long term strategic benefits is the use of alternative risk transfer / strategic risk financing vehicles such as high retention insurance policies and captive insurance companies. There still seems to be too much reliance on lowest cost insurance premiums and dollar swapping premium for claims. Pan-Asian Risk & Insurance Association 4

4. Are Asian companies prepared for ERM? Shouldn’t the question read “Are Asian companies ERM prepared?” For listed companies who are bounded by more requirements by the respective Exchange, to comply with, which including corporate governance and internal controls, then yes they are better ERM prepared. In countries like Australia, Singapore etc that have more tightened and strict regulations the companies are relatively more prepared than other countries. Industries like the Banks and Insurance companies where scrutiny is greater so is the focus in improving the risk management framework. In developing countries ERM practices are probably still being implemented by many companies. With respect to SME companies, very few organizations have truly started an ERM program. Pan-Asian Risk & Insurance Association 5

4. Are Asian companies prepared for ERM? The example of Hong-Kong In its theoretical form, ERM’s adoption in Hong Kong remains very low, and will probably remain that way for the majority of companies for the foreseeable future. Even basic risk management principles are only now just being adopted by many of the listed companies as a result of the corporate governance provisions of the listing rules of the Hong Kong Stock Exchange, and for closely held unlisted companies in many instances risk management as a discipline is not even on the radar. This is not to say that risk management is not practiced, because no company could survive without some form of risk management, it’s just that there may be no formal or structured risk management regimes in place for the majority of such companies. The other significant problem, is that there are just not enough people who truly understand and practise risk management as a discipline, let alone enterprise risk management. This is one reason why PARIMA has as a stated primary objective the support, education, and development of risk managers and the risk management disciplines throughout the region. Pan-Asian Risk & Insurance Association 6

5. Are language / Culture differences a serious obstacle for the risk management community in Asia ? Culture is a huge factor to determine whether Risk management will be taken seriously. China, Taiwan, Hong Kong, Korea: local organizations tend to pay very little interest to risk management, unless they are forced by regulators, auditors or external market forces. E.g. An industrial company built ERM, not because they really believed they needed it, but because their rating agencies (Fitch, Moody’s) told them it would increase their rating if they had proper risk management. Lots of lip services around. E.g. Korean organizations; they will show you all the relevant documentations and standards and even will have a risk register… but nobody really use it. Risk Management is at its infancy. Change in the mind-set about risk management is supported by globalisation and enforcement. Even then when it comes to Risk Management, regulators can only tell you “what” to put in place but not the “how” so the effectiveness of these measures becomes a question? Pan-Asian Risk & Insurance Association 7

PARIMA: the rise of the Asia’s Risk Managers community To date, the resources required to support Asia’s developing community of risk managers have been somewhat lacking in a truly structured and readily available form with true relevance to Asia in general. Thankfully, this will soon be changing with the advent of PARIMA. We believe PARIMA will be a truly valuable resource for all risk managers in Asia, whether wizened old hands looking for new ideas, established risk managers looking for support to justify changes to their risk financing strategies, or as a risk-management-101 for people from the HR or finance departments who have risk management / insurance management thrust upon them as additional responsibility in a rapidly growing company. Like the other risk management associations, PARIMA is being developed by risk managers for risk managers who see a need and have the commitment to enhance and support the practise of risk management as valuable and respected profession within Asia. Pan-Asian Risk & Insurance Association 8

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