Growing need for boards to embrace enterprise risk management

Regulations across Africa are still essential for driving good risk management practice and boards need to shape up as standards rise, according to participants in a roundtable hosted by Commercial Risk Africa last week. Taking part in the roundtable, at the 44th African Insurance Organisation general assembly in Kampala, the roundtable participants told Commercial Risk Africa that regulation remains necessary. Recently retired commissioner of insurance for Tanzania, Israel Kamuzora, explained: “People are interested to know how risks are being identified and managed. Regulators are still taking risk management as good practice. “We need to encourage CEOs and boards to exercise enterprise risk management. But a problem is the quality of boards. Boards need to be setting the tone from the top. Risk management is every bit as important as, say accounting, but most boards don’t know what it is. “Too often the risk committees are focused on the financials but not on risk appetites or even the risk matrix. They are not asking the right questions – or even any questions at all,” he warned. “We have to do something about that.” Several of the roundtable delegates questioned, for example, whether anyone from main boards had actually picked up the phone that weekend and called their IT departments in the wake of the WannaCry attack, to ask whether their firm was vulnerable to that attack – or another similar one. Raymond Snyders, CEO, Mutual & Federal, pointed to the tough economic climate: “The economic climate is increasing pressure for most institutions, but the economic climate is an increased risk. “Risk management is sitting in a difficult position. I think we find ourselves managing this paradox but there is a responsibility to create awareness of the full value chain.” He stressed: “Creating that awareness is not about creating anxiety but to help bring calm and accurate data to the conversation. Too much is about emotion.” Mr Snyders said there is a real need for accurate data to enhance the arguments. In terms of the insurance relationship, he said it is all about triangles. “There are always three people in the conversation – the insured, the broker and the insurer; or the insurer, the loss adjuster and the broker; or the broker, the insurer and the reinsurer.” Mr Kamuzora agreed that data can help fuel those three-way conversations but emphasised the importance of sharing that data. He believes data is available. “For example, the regulator can tell you how many vehicles are on the road and how many are insured. But he would need to ask someone else how old those vehicles are. Data has to be organised so we can all use it either as underwriters or as regulators,” said Mr Kamuzora. The insurers admitted that data sharing would always be difficult in such a competitive environment and that not many companies would want to provide any information that would give their competitors an equal chance to win the business. There was agreement that, contrary to popular opinion, the information does exist in Africa – but ownership of the data is fragmented. The group did also acknowledge that, while information exists today, the detailed historical data needed to properly rate risks does not necessarily exist. Lukas Mueller, head of North & Sub Saharan Africa at Swiss Re, reminded participants about the power of data but suggested “many companies struggle” to make use of that information to their best advantage.

Growing need for boards to embrace enterprise risk management

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