Lambros Lambrou

The global risk management and insurance landscape has changed forever as the implications of big data continue to impact broking, underwriting and reinsurance markets and disrupt accepted business models.

This is the new reality driven home by global and local risk specialists at the Aon Advanced Risk Finance Conference held in Melbourne earlier this month. The Conference was attended by over 300 representatives of industry giants from all sectors of risk management.

Speaking about the lessons to be learned from specialists in the field, Lambros Lambrou, CEO of Aon Risk Solutions Australia, challenged conference attendees and the broader business community as to whether they possess the skills needed to compete and succeed in an environment undergoing fundamental change.

“There is no doubt that big data has changed our industry forever, and industry participants must take the necessary steps to understand its implications if they wish to remain competitive,” he said.

“For example, data scientists and actuaries, often from non-insurance backgrounds, are now at the very centre of insurance markets, and the risk community needs to accept the change and leverage their skills in big data and analytics,” he added.

And it’s not just big data driving change. The annual conference also tapped into Aon’s global expertise in research and analytics to highlight some of the other pressing issues facing businesses today. Sessions chaired by global specialists offered a glimpse into the future and revealed insights into how businesses can and should respond to a variety of risks in order to achieve the results they are aiming for.

These areas included:

Returning to the theme of big data, Mr. Lambrou stressed that companies have nothing to fear from it. In fact, those willing to get on board have a great deal to gain.

“Harnessing big data and interpreting it to develop fact-based insights does require specialist skills, but those insights can be used to improve every aspect of the industry, from pricing efficiency to policy construction and risk financing strategies,” he said.

“Brokers and other insurance industry players have much to gain, among many others. And, far from minimising relationships with clients as some may fear, relationships based on science and robust data and insight, as well as trust, are likely to be deeper and longer lasting,” Mr. Lambrou said.

He concluded by saying that the Aon conference brought home the revelation that the power of big data lies in its ability to drive smarter business decisions.

“Which brings me to Aon’s ultimate aim – to use our unique global strengths and expertise to raise the industry benchmark and empower results, helping our clients understand the dynamics of the risk management industry they are in today, and ultimately to partner with them to fuel superior outcomes tomorrow,” he said.

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Lambros Lambrou

Most companies understand that they must address risk to remain competitive and grow their business. However the real challenge for business lies in understanding and developing the tools and solutions necessary to succeed in the face of the ever-accelerating change and complexity of today’s risk landscape.

So said Lambros Lambrou, CEO of Aon Risk Solutions Australia, a risk management business of Aon plc (NYSE:AON) ahead of the tenth annual Aon Advanced Risk Finance Conference, which kicks off in Melbourne on 8 October. The theme of this year’s conference, “Ten Years of Risk Financing Insights”, will drive home Mr. Lambrou’s point, highlighting that risks which now appear high on many organisations’ agendas barely existed 10 years ago.

According to Mr. Lambrou the breadth and variety of risks businesses now face requires them to mitigate against a wider range of issues than ever before, from white-collar crimes to cyber risk.

Mr. Lambrou highlighted cyber risk as a significant hazard in a technology driven environment that often flies under the radar: “The potential ramifications of cyber risk, which has been described as “the asbestos of risk”, are widely underestimated, particularly here in Australia where we are demonstrably behind the curve when it comes to even a basic understanding of the issues. This applies not only when it comes to individuals’ privacy, but for the integrity of entire organisations. That includes major liability issues at the Board and Director level right through to the very real threat that cyber risk poses to undermining everyday operational capability.”

The underlying theme of the conference focuses on the importance of ‘big data’ in shaping the future of risk management and helping businesses address issues like cyber risk in a more sophisticated way.

“The risk management industry has become the poster child for resolving the vexed question of how to put big data to use, and in so doing has transitioned from being a relationship, intuition-based industry to one that is increasingly truly data driven,” said Mr. Lambrou. “As our industry plays a vital role in promoting global economic growth, we must use the data and technology available to us to evolve faster than our clients on their risk and people issues to support them in meeting the challenges in the future. This conference is an ideal forum in which to do this.”

In addition to looking at global and local insurance and reinsurance trends, the conference will examine another important economic issue: risk and people – and, more specifically, how they interrelate.

“An organisation’s people is its most valuable asset. People risk is often at the heart of our conversations with clients, and rightly so. Failing to properly mitigate against this risk will have catastrophic outcomes for any business,” said Mr. Lambrou.

The Aon Advanced Risk Finance Conference 2014 will highlight the following issues:

• Shareholder value and risk maturity – the strong correlation between a company’s risk preparedness and its financial performance
• Big data – developing tools to harness its power to make better risk management and financing decisions
• Global insurance and reinsurance markets – the effect of the flow of capital from alternative sources such as pension funds and the need to use this capital to innovate
• People risk – the so-called ‘soft science’ that hits hardest on the bottom line
• The psychology of the white-collar criminal
• The “asbestos” of today’s risk management world: cyber risk

The conference unites global specialists from Aon’s London, Chicago, Singapore, Ireland and Beijing offices to share latest industry trends and data and offer risk management and financing insights to an audience of leading Australian and multinational companies.

Conference sessions will be delivered by key Aon executives from across the world, in conjunction with some of Aon’s major clients, including Coca Cola-Amatil, Lend Lease and Tesco, along with a range of experts from academia, the insurance industry and the corporate world.

Mr. Lambrou concluded: “While organisations have a surplus of information, which is growing exponentially, they also often have a shortage of insight. Understanding that information as it relates to risk and how to mitigate it can have an extraordinary effect on the growth and bottom line fortunes of any organisation.

“Risk and insurance go hand-in-hand, but our conference agenda goes beyond the surface to drill into the hard data and trends that underpin the way every single industry should be looking at managing the countless risks they face.”

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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.”

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