A job well done

Paul Hopkin left Airmic at the end of March having held the position of technical director for nearly nine years. The vastly experienced risk manager, who has worked across a variety of organisations including the British Broadcasting Corporation (BBC) and Rank Group, will be a big loss for the association. His dry sense of humour will no doubt be as sorely missed as his technical ability and deep understanding of the risk and insurance world. Current Ferma president Julia Graham will be his replacement. Post-Airmic Mr Hopkin plans to take on a variety of roles. Having started his career as a teacher he hopes and expects to be involved in training insurance and risk managers, in particular those that are new to the profession and are looking for their first qualification. “Whatever I do, training and education will form part of it,” Mr Hopkin told Commercial Risk Europe. Looking back at his time at Airmic, Mr Hopkin views last year’s Roads to Resilience report that he joint-authored with experts from Cranfield as a key achievement. He also cited Airmic’s recent Insurance Efficacy Guide as a highlight, particularly given the challenge of codifying and structuring all aspects of insurance for the project. “Although they are two of the most recent initiatives, those are the things that I am genuinely proud off,” said Mr Hopkin.hideLooking forward, he believes Airmic and his successor will continue to focus on the efficacy of insurance. He explained that Airmic’s day one policy issuance initiative is now well underway, with its issuance timeline live on its website. Going forward, Airmic will fragment recent guides and advice onto the timeline to make the information more accessible. Using the coming months the association will also consider the implications of the recently passed UK Insurance Bill with Airmic’s day one policy issuance timeline covering various aspects of the new contract law. Beyond swift and fair insurance placement, there is of course the small matter of market solutions covering the full range of risks faced by large and multinational companies in the modern business world. Mr Hopkin said successful innovation is the most important area for insurers to improve in order to make life easier for Airmic members and risk managers more generally. It is the number one priority of buyers, he added. A lack of innovation in the face of ever changing business models is making the job of insurance buyer increasingly difficult, said Mr Hopkin. Insurers are yet to come up with a range of answers to emerging risks such as supply chain, political, cyber and reputation damage, he pointed out. “On the one hand, insurance is cheap in the soft market but, on the other hand, a case can be made that the insurance product has not kept up with changes in business models. This makes, and will continue to make, the job of insurance manager tricky,” he said. He conceded that insurers face a tough time to gather the right data and correctly price for innovative risk transfer solution. There is no ‘silver bullet’ solution, he said. Risk managers understand the constraints that insurance companies are under and that they might not want to put capital to one side in order to write new covers given that insurance prices are so low, he continued. Nevertheless, better solutions are needed for all concerned. “I would go as far as to say that insurers have to innovate if they are to remain relevant. An area that Airmic and individual risk managers look at is the relevance question. How relevant is insurance to our business model? Has the insurance world kept up with changes and innovated? The reason these are rhetorical questions is because we know the answer is not always,” he said. Two emerging risks for which insurance buyers are demanding new solutions are cyber and supply chain. While Mr Hopkin said improvements need to be made in both areas, he praised the insurance industry for ‘making a better hash’ of innovation for cyber risks. Cyber challenge He said the insurers have matured considerably when it comes to cyber cover, especially in the US. But he noted that the main developments have been for data protection and breach. However, he said it still remains difficult to get meaningful cover for first party cyber-related losses caused by businesses disruption from, for example, malicious attacks or IT system failures, or solutions for the theft of intellectual property. He said the market for such covers is developing but not to the level needed by the large insureds. “From what I understand, you can get $100m of cover relatively easily, maybe $250m limit at a push. But if a large internet-based company, such as Amazon or Expedia, is down for minutes the sums of loss for the business could be substantial. The insurance world is therefore understandably saying we can’t price this risk. So it is a slow and difficult process but products are developing, albeit at lower limits than many of the big insureds would like,” he said. He was more critical of supply chain solutions. “While significant developments in broader supply chain insurance took place in the early part of this decade, improvements—such as the coverage offered, the level of information required from insureds, limits of indemnity and cost of coverage—have slowed in recent years,” he said. While the lives of insurance buyers are being complicated by a lack of suitable transfer solutions, risk managers’ biggest challenge is proving that they bring a tangible benefit to their companies, argued Mr Hopkin. “We have got to a position where people accept that risk management is an inherently good thing to do and people can demonstrate that businesses appear to be better run when they do risk management, but there is the real challenge of quantifying and proving that benefit. That question has been looming larger and larger over the years. Proving the value is an exceedingly difficult thing to do. But going forward risk managers will need to come up with a way to better prove that what they are doing brings benefit and I don’t think we have any real solutions to this as yet,” said Mr Hopkin. The ex-Airmic man said he would like to see improvements in innovation at insurers matched by a willingness amongst brokers to improve transparency. Transparency is the major expectation of insurance buyers when it comes to their brokers, he said. “Brokers need to broaden their role and give good advice, but against the backdrop of being transparent about what exactly they are doing, who they are doing it with and how they are being remunerated,” said Mr Hopkin. “They need to reassure their clients, the risk managers, that the advice being given is entirely objective and not being influenced by some second income stream.” More collaboration needed He also stressed that it is not just on the supply side that new risks are throwing up almost insurmountable obstacles. Risk managers and insurance buyers themselves are having to change their approach to better deal with emerging threats. According to Mr Hopkin the solution is more and improved collaboration between the risk function and other departments. “I think risk managers are struggling to quantify these emerging risks to some degree. Increasingly risk managers are realising that they have to set up internal networks and communications within their own company to deal with these risks. By which I mean there is no point in getting a quote for supply chain or cyber first party disruption as a starting point. Risk managers increasingly know that they need to get constructive discussions going within their organistaions,” said Mr Hopkin. “Once you get into emerging risks then risk managers have really got to develop a much more collaborative approach—first of all within their own organisations…Risk managers have to properly engage internally in a much more collaborative way than perhaps they have in the past. I think this is a message that risk managers increasingly understand,” he said. As an example he said a great question to ask any IT manager is “who is out to get us then?” This makes IT think in a completely different way, carry out risk assessments and help identify where better controls are required and insurance could possibly help, said Mr Hopkin. Better collaboration can also help partly solve the eternal battle risk managers face in securing more resource to do their job. Those struggling to get extra funds must modify their approach and change to ‘plan b’, said Mr Hopkin. “Plan b is better collaboration to get other people and departments to help you with your risk management so you can tap into other resources. If you can get your treasury department, for example, thinking about risk management and following the risk management process you can use some of its resources to help you come up with answers. So it is about using resources that are already within an organisation and can be used to help support the risk management role,” he advised. Spreading the load A collaborative approach combined with robust governance also gives risk managers peace of mind and allows them to sleep a little more easily at night. As Mr Hopkin pointed out: “Rather than the risk manager shouldering all of the responsibility, if you have a robust governance structure with a risk management committee, good working relationship with company secretary, treasury, tax, internal audit and others, that collaborative approach and strong governance gives you peace of mind,” he said. Driving collaboration requires risk managers to bring their influence to bear. The first level of influence has to be in the forum that discusses risk—the non-executive risk committee, audit committee or executive committee, said Mr Hopkin. The members of that forum are the people you have to influence, he added. For risk managers working in the finance industry that forum will be the risk committee headed up by a non-exec, he said. For other industries, especially those less heavily regulated, the risk management committee is often an executive committee headed by the group finance director with the company secretary, financial controller and other heads of departments, he said. “Crucially they are all executives and if that is your structure then that is where you bring your influence to bear,” he stressed. Although Mr Hopkin believes educating senior staff about risk management should begin at business school, once in situ risk managers have to become the teacher and risk leader, he said. “The risk manager has to lead the discussion, educate and ask the pointed questions—who is out to get us, what could get us, what could undermine our existence? You need to get to the people that are responsible for the answers to those questions because they are the people that the risk manager needs to influence. So it is down to the risk manager to educate top management about risk once you are in a live situation,” he said. And finally, drawing on all his experience over the years, Mr Hopkin said that his number one tip for any risk manager is to work within the culture of your organisation. “Having worked at the BBC with its executive committee of two dozen executive directors and then moved to the Rank Group with just two executive directors, the two cultures were chalk and cheese. In no way could I have taken what I did in the BBC and implanted it in Rank. So my strong advice to any risk manager is understand your organisation, the culture, its politics and work within the framework of your employer,” he advised. “If as a risk manager you come in to an organisation and say I know the answers and fail to listen, collaborate or consult you can be fairly sure that your one-size-fits-all model is not going to work,” Mr Hopkin sagely signed off to CRE.

A job well done

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