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The risks that inevitably lie ahead

05 September 2019 Myra Knoesen

The 2019 African Insurance Exchange’s theme this year spoke of the need for growing, learning and coming together.

“Growing our businesses, the greater insurance industry and the economy as a whole. Learning as much as we can in order to navigate a tricky business environment and coming together, to create synergies and serve our clients in the best ways possible,” said Thokozile Mahlangu, Chief Executive Officer of the Insurance Institute of South Africa (IISA).

The topics covered by the speakers and panelists at the conference reflected the diversity of our industry. From risk management and transformation, to climate change and cyber security, Mahlangu emphasised that these are issues that impact all of us, and the industry as a whole.

Speaking of risk management, Nico Esterhuizen, General Manager of Insurance Risks at the South African Insurance Association (SAIA), hosted a discussion with Bridy Paxton, Client Advisory Services (CAS) Lead at Marsh Africa, Natasha Goring, Managing Director at the Automatic Sprinkler Inspection Bureau (ASIB) and Thabile Nyaba, Chief Risk Officer at Old Mutual Insure, on the realities of risk management and what the future holds.

Pillars linked to risk

“The risk landscape has/is changing, and risks are evolving at a fast pace as the world is more connected than ever before. There are environmental pressures, increased regulatory pressures, global, political and economic risks, interconnectedness, new customer demands, the list is endless,” said Paxton.

There are five pillars that Paxton said represent the evolving expectations and realities of risk management and these are the environment, business agility, governance, technology and culture.

“We have seen large firms being wiped out because of poor governance, but companies have started to take risk more seriously, with tougher governance to respond to the risks and opportunities presented by the changing environment.” she said.

“A more complex risk is the environment. The risks of, climate change for example, is all interconnected, creating other emerging risks that were not present before. In building resilience, we need to understand and adapt to these changes,” added Paxton.

“The fourth industrial revolution is already here, and we are in it. With interconnectedness and technology, we see cyber threats and attacks, and the risk landscape continues to evolve. However, new digital capabilities are adding value, efficiency and quality,” continued Paxton.

“The rising importance of culture is another key area. Have we started to consider what the workforce of the future will look like? We already have generational gaps within organisations that are presenting barriers and/or communication issues. Have we started to consider the effects of artificial intelligence on the workforce, systems and processes?” asked Paxton.

“Let us imagine our future before it happens, so that we are prepared,” said Paxton in her concluding remarks.

Change is constant

“Change is a constant in the industry, resulting in new risks. How prepared is your organization for the risks and opportunities that inevitably lie ahead?” asked Nyaba

In looking at some key areas, Nyaba said, “there are regulatory and compliance changes; there are increased costs associated with the regulatory environment, but there is an opportunity to adapt to changes though product innovation. There is climate change and catastrophes; these are increasingly volatile and unpredictable, with changing weather patterns and an increase in frequency. There is an opportunity to collaborate to mitigate the risks against natural disasters, for example, flood protection infrastructure.”

“There is competition from traditional and non-traditional players, but we have an opportunity to leverage access to customers. Technology and data are a global trend driving disruption and threats, but we can use it to accelerate growth, margin improvement and operational excellence. In operational resilience, we have the ability to adapt and recover when things go wrong,” continued Nyaba.

Risk agility and resiliency

Organizations that balance risk agility and risk resiliency are more likely to have long term success, according to a PwC risk report, titled Risk in Review: Going the Distance.

The report defines risk agility as an organization's ability to respond quickly to changing markets, customer preferences, or market dynamics. Risk resiliency is defined as an organization's ability to withstand disruption by relying on solid processes, controls, and risk management tools and techniques, including a well-defined corporate culture and a powerful brand.

As Christopher Palm, Chief Risk Advisor at the Institute of Risk Management South Africa (IRMSA) once mentioned, “Inherent in the role of risk management is the capability to imagine future scenarios - what could happen, what might be and what it means for us today. Risk managers must therefore learn to think like futurists if they are to guide their organisations through the next decade. This includes integrating risk management into the culture of the organisation, especially in an environment where change is disruptive and exponential. This is what the 2020s are going to be about - much more so than we have experienced thus far.”

“There are three risk development focus areas to focus on. First, is the future. Risk practitioners should be “the ultimate integrators” of strategic and business risk information and adding to that, the value of predictive capabilities, facilitating discussions about alternative futures and opportunities. Secondly, understand disruption. We can only change a risk profile if we understand and deal with the causes of change. Risk practitioners must be able to take the lead and guide their leadership in making sense of disruption, both the risks and opportunities. And thirdly, know the level of risk maturity as an indicator of, amongst other things, leadership views on the importance of driving risk response/action plans, how comfortable they are with potentially controversial risk issues being highlighted within the organisation as well as their level of innovation and resistance to change,” said Palm.

“The role of risk managers in the 2020s will not be merely to identify future risks, but also to ensure that these capabilities are developed throughout the organisation. This will greatly improve the contribution that risk managers make to their organisations,” concluded Palm.

Editor’s Thoughts:
The playing field has changed, and the profession of risk management is even more elevated and prominent, showing the impact of the management of risk within all areas of business. The above-mentioned risks are a catalyst for conversations as your organisations prepare for the 2020s. How prepared is your organization for the risks and opportunities that inevitably lie ahead? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za

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