But planning still the key to risk management success
Insurance industry close to full recovery after Asia-Pacific disasters.
Nearly two years on from the devastating series of natural disasters that saw floods, bushfires, earthquakes and tsunamis scar the Asia-Pacific region, the insurance and reinsurance industry is close to recovery. With the great majority of short-tail claims now settled, insurer capital is returning to regular levels and consequent capacity across a range of product lines and industries is bringing renewed opportunities for insurers and insured’s alike. Additionally, there is an increasing level of ‘alternate capital’ that is now entering the market and is prepared to operate at a far lower return on capital than traditional insurers and reinsurers.
That was the positive news greeting attendees from some of Australia’s leading business and insurance organisations at the Aon Advanced Risk Finance Conference in Melbourne last week.
According to Steve Nevett, Chairman, Pacific Region, Aon Risk Solutions, positive news for the insurance industry spells positive news for Australasian business, freeing insurers and reinsurers to invest in developing more targeted risk management solutions.
“The APAC region suffered terribly due to a string of natural disasters in 2010 and 2011. With insurer and reinsurer capital and capacity significantly depleted as a result, there was limited opportunity for innovation and development – despite the clear need for new solutions as industry risk profiles change,” explained Mr Nevett. “However the relatively clear run that we’ve had over the past two years in Australasia has helped the market find its feet and apply its growing capacity to underwriting new risks and expanding product offerings.”
In addition to examining broader global and local risk financing trends, the conference offered practical lessons in risk management techniques and strategies from leading corporations including UPS and Coca-Cola Amatil.
“A key lesson from both was that business cannot treat supply chain risk mitigation as a ‘set-and-forget’. Instead, each potential risk should be addressed in line with need and adjusted as circumstances change,” said Mr Nevett.
The UPS case study was a reminder to attendees that managing risk can be difficult for any corporation, regardless of size. From an internal perspective, best practice risk management is dependent on all the parts – people, processes and technology – working together seamlessly.
The Coca-Cola case study addressed supply chain risk management, drawing upon their experiences from the recent spate of natural disasters. It focused on how important it is for corporations to continually monitor the types of risks applicable to their individual situation so as to ensure they have appropriate protection – be it through intelligent and responsive risk management frameworks or risk transfer strategies such as insurance.
Perhaps the standout presentation was one that compared the daily risk management strategies of elite fighter pilots with those of risk management professionals in business.
Delivered by aeronautical daredevils, Afterburners Australia, it addressed the respective role of planning, briefing, execution and debriefing in any successful exercise. The key message from these expert risk-takers? That execution comprises only about 5% of success. It’s the other components that have a far greater influence.
“It’s hard to imagine a more risky occupation than being a fighter pilot, so it was of particular interest to note that planning, briefing and debriefing is their focus, over and above the flight itself. It’s a formula for success that is just as relevant to risk management professionals. And it’s our hope that much of what attendees heard and experienced at our conference will help them achieve that level of success and flawless execution.”
