Published on February 18, 2014
Risk communication – internal and external perspectives Steve Fowler, Chief Executive Officer, Institute of Risk Management 7/10/2013 1
Risk communication – internal and external perspectives • Communication, culture and risk • Communication, culture and risk management • Changing communication through culture 7/10/2013 2
Risk communication – here ?
A key factor in risk communication is organisational culture
Different types of organisation will have different cultures And there can also be different cultures in different parts of the same organisation
The culture of a group Arises from its repeated behaviours Behaviours are shaped by attitudes Behaviour and attitudes are influenced by culture This impacts risk communication styles Risk Communication
….and a model for addressing risk culture
10 Indicators of a successful risk culture Distinct and consistent tone from the top Commitment to ethical principles Common acceptance of the importance of continuous management of risk Transparent and timely risk information flowing up and down Encouragement of risk event reporting and whistle blowing No process or activity too large or too complex or too obscure Appropriate risk taking behaviours rewarded and encouraged Inappropriate behaviours challenged and sanctioned Risk management skills and knowledge valued, encouraged and developed, Diversity of perspectives, values and beliefs to ensure that the status quo is consistently and rigorously challenged Alignment with employee engagement and people strategy
How to change risk culture and communication
Risk communication – internal perspective Olly Reeves, Head of Risk Management, Lloyd's 7/10/2013 14
Lloyd’s as a Marketplace Corporation of Lloyd’s Insurance broker 7/10/2013 57 Managing agents Capital 88 Syndicates 15
Risk communication – internal perspective Insurance company / Group Board Executive (e.g. Chief Underwriting Officer) Management (e.g. Class Underwriter) Staff Lloyd’s Corporation • Set strategy and performance targets • Set business plan: • Class • Volumes • Price • Oversee underwriting • Set risk appetite • Set and allocate capital • Allocate underwriting authority • Set Society level risk appetite • Set Lloyd’s minimum standards • Approve / reject syndicate business plans • Approve / reject new entrants • Set minimum capital level for members • Impose sanctions and direct remedial action (e.g. Underwriter) 7/10/2013 16
Risk communication – internal challenges Adequate ‘base level’ coverage of risks Points of escalation – how to focus for each audience in the hierarchy Ability to focus upon those most material / key risk issues Financial vs. non-financial Known vs. emerging Some examples 7/10/2013 17
Risk Communication in a large industrial company Adrian Clements, General Manager - Corporate Asset Risk Management, ArcelorMittal 7/10/2013 18
Risk Customers and their needs Investors Governments Board members Sites Insurance Companies Corporate Governance Rating agencies/NGO’s 7/10/2013 Their needs are different Their appetites are different So are they changing the risk mapping of ArcelorMittal? 19
What is our risk? We are changing our communication to suit the individual needs of our stakeholders This is only possible if we have a robust consistent methodology for risk identification and assessment and a clear appetite approach. Investors Pushing for water risk management Insurance companies Risk of fire explosion, business interruption, cyber Governments Eg – Insurance - the risk to our main power transformers is not fire but delivery time of a new unit. Thus sprinklers is not the solution as it does not reduce delivery time. 7/10/2013 Looking for sustainability, image, best practise, compliance Plants One stop shopping? NO! Tailor made solutions for each Pushing for meeting business plan needs Corporate governance Influenced by rating agencies who look at water, CO2, environment Board Best return on investment, improving market share Forex 20
Does the stock market know enough to put a price on the juggling act of most companies? Transferred? Hedged? Taken? Managed? Reduced? Black swan Entrenchment? Europe 7/10/2013 robust Sustainable? technology 21
Time Horizon • Three levels of risk management: • Plant, Company and Economy • Appetite is changing depending on location, country product and world growth. • Companies are divided between share/stakeholder value and customer need • Expanding complexity of the risk universe in relation to the economy makes communication challenging 10/7/2013 22
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