German risk managers upping game to meet the big risks

German risk managers taking part in our European Risk Frontiers survey identified economic, political and social uncertainty as the main risks currently facing German companies as they, along with all other companies in Europe, rapidly work out how to cope with the changing conditions in which their companies operate. The fundamental job of the risk manager is to try and bring some certainty and stability to their organisation’s operations through the formal identification, management and mitigation of all those risks that threaten to scupper the corporate plan. It should come as no surprise therefore that the senior members of the German risk and insurance management association – GVNW – identified risks such as cyber, political uncertainty, regulation and the challenges and opportunities brought by the rise of the digital age as the biggest risks that they, their colleagues and bosses currently face. Survey participant Alexander Mahnke, head of insurance at Siemens, spoke to Commercial Risk Europe in his capacity as president of the GVNW. When asked to identify the biggest three risks currently facing German companies, he said: “This obviously changes from company to company but for me the number one risk currently has to be cyber. Another big concern for us as a global engineering company is construction of large projects, especially on a worldwide basis. Business continuity remains quite a challenge.” Eberhard Faller, SVP of corporate insurance at chemicals giant BASF, said that big political and regulatory risks are the main concerns for German companies. “Political risks remain quite a challenge. Regulation is another important area for us. Our CEO Dr Kurt Bock is president of the German chemical industry association (Verband der Chemischen Industrie – VCI). In this role he recently released a statement calling for a more business-friendly approach to regulation and, in particular, more funding for research and development and greater collaboration between the industry and universities in Germany. This comes as Germany of course nears the election on 24 September,” he said. “The state of the national and global economy is another big concern. We still have very low interest rates and that has a big impact in many areas, and of course there is Brexit. The outlook for the chemical industry is actually pretty healthy for 2018 but there is a longer-term risk for this sector as highlighted by Dr Bock in his statements for the VCI,” added Mr Faller. Matthias Beck, head of insurance and risk management at industrial assembly materials and tools firm Wuerth Group, said that cyber is top of his agenda currently. He also flagged the huge developments underway in the global economy caused by the rise of new technologies and changes to distribution models, competitors or potential partners, as big risks. “Cyber is of course at the top of the agenda currently and this comes in many guises. You also have to consider your business strategy from a technological standpoint. We are a worldwide wholesaler in assembly and fastening materials as well as tools, operating in over 80 countries. Companies like Amazon have become active in our core business as a supplier to professional end users. This is on the one hand a big challenge for our direct sales model, but on the other a great chance and opportunity to further differentiate through our multi-channel sales strategy,” he said. Christian Böhm of Freudenberg Group, the family-owned diversified group of companies, agreed with his fellow GVNW member. “Matthias is correct, the rapidly changing nature of business because of technological change presents both challenges and opportunities in equal measure. Look at the future of the automobile industry. What does the rise of autonomous vehicles mean? That can be considered a risk and both an opportunity and challenge,” he said. The German risk managers were then asked how they could and should become involved with the big strategic risks. The big question is: What can a risk manager bring to the table? Mr Mahnke said that risk management must play a major role because digitalisation and everything related to this presents a great opportunity for businesses of all types. “Business models are changing and new profits can be found but, also, if the wrong decisions are taken a lot of money can be lost. So, the right decisions need to be taken and this is what risk management is all about, helping companies make the right decisions,” he said. “Management needs to use the right instruments to help make the right decisions and then use risk mitigation instruments such as insurance as a supporting tool. Therefore, risk management and risk managers have a major role to play,” added Mr Mahnke. The problem is, of course, that there is no one-size-fits-all solution, pointed out the GVNW president. “How risk and insurance management is applied varies from company to company and sector to sector. Some sectors are highly regulated and so compliance is the dominant theme. In other sectors risk management can more readily be used as an active management tool,” he explained. Mr Mahnke said that modern management technologies and techniques can be used by risk managers to help ensure management responds to, and anticipates, challenges. “From a professional perspective, we have to make sure that the wider business understands what we do and what we can offer and ensure that we are provided with the right information that we need to build an effective risk management system,” he said. It is critical for individual risk managers to sell their value within their organisations. Again, Mr Mahnke said that, in this view, there is no simple one-size-fits-all solution to achieving this. “This is difficult to answer because it really differs from company to company and from one industry to another. The answer, in my view, lies in how you go about it. There is no single answer – you need a portfolio of instruments to respond to your clients’ (internal managers) needs and demands,” he said. “The GVNW provides a platform for an exchange of best practices and experiences between risk and insurance managers with larger companies, we can help each other out in this way,” added the GVNW president. One interesting development in recent times is the work that associations such as GVNW and others across Europe such as AMRAE in France and Anra in Italy are doing to help promote the profession within the middle market companies that historically do not have dedicated risk managers but can still hugely benefit from the value brought by the discipline. “There are other – usually smaller – companies that do not know about the value risk management can bring. For these companies you need to package things up for them. This is an ongoing process. We have good examples where the association has made real progress in explaining the value that risk management can bring, but there is a lot of potential in this field. One potential area is the provision of education and training, particularly for small to medium-sized enterprises (SMEs) or the Mittelstand as we say in German,” said Mr Mahnke. Mr Böhm agreed with Mr Mahnke that there is real potential for GVNW in this area. “We already do hold successful events on very important risk management topics such as our annual cyber and financial lines symposium. The participants who attend this event are not just the big companies but also Mittelstand companies. So, this is very successful,” he pointed out. Cyber is an obvious area in which associations such as GVNW can help advise smaller companies on risk management and insurance. But, as Mr Mahnke pointed out, there is a lot more to offer on a regional basis to a much wider market. “We continue to have a regional focus and reach with a range of regional events across the country. Germany is a Federal Republic and so we need to take this regional approach and the events we hold cover various insurance and risk management topics, not just cyber. In this sense, our federal system plays into our hands. For smaller companies, coming to our events in Cologne, Frankfurt, Hamburg or Munich is not a problem and so this represents a good opportunity to spread the risk management message to all kinds of companies,” he said.

German risk managers upping game to meet the big risks

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