Big Spanish firms urged to help develop risk management across supply chains

Experts say that the risk function has made significant inroads at large Spanish companies since the global financial crisis and received an extra push from the Covid-19 pandemic. But they stress that risk management still has a long way to go among small and medium-sized firms in Spain, and call on risk managers at bigger corporations to help spread the gospel. As in other European markets, risk managers have ploughed their way in Spain as companies faced an alarming growth in risks. Now they are often closer to boards and more involved in strategic decisions than in years past, reflecting an awareness among their bosses about the need to effectively manage risk. “Twenty years ago, when I mentioned the word ‘resilience’, people would tell me to delete it from reports because it did not exist. Now everybody understands what ‘resilience’ means,” said María Isabel Martínez Torre-Enciso, a member of the board at Agers, one of Spain’s risk management associations. “Change started slowly, it picked up pace little by little and now we are running.” The trend is such that, in some cases, risk managers are finding themselves with too much on their plates, she said. “It is important to boost the professionalisation of the risk function,” Martínez said. “It is true that there are more and more people working with risk and that its scope is expanding, but it is also true that companies are mixing risk management with other business functions.” Previously, risk managers did not have to deal with topics such as IT security, governance or compliance, but now they often do. On the flip side, playing a bigger role seems to have emboldened risk professionals to be more assertive when dealing with insurers, reinsurers and brokers. “Current risk managers have a more specific background than in the past, when they were more akin to sophisticated insurance buyers. Today the focus is different. Tasks related to the design of insurance programmes likely represent only a part of their routines,” said Paulino Fajardo, a partner at the Herbert Smith Freehills law office in Madrid. But if risk managers are well represented at big Spanish corporations, they are still a rarity among small and medium-sized enterprises, which represent around 90% of the country’s companies. Such companies are not required by law to have a risk management structure, and tasks such as insurance buying are often performed by financial directors, CEOs or even business owners. These people rely extensively on brokers and consultants to help with risk management activities. “It is not a strange thing that a broker’s interlocutor in matters of risk is the financial director,” said Argente, a Valencia-based broker. “In some cases, the financial director may be more focused on savings than on making the necessary investments in insurance, but there are others who see from the beginning how important it is to manage risks.” Isabel Casares, a Madrid-based consultant, said that large companies must be more involved in spreading risk management among their supply chain to help increase resilience. “In the long run, Spanish companies must adopt a broader and more anticipatory view of risk management. This means they must not only react to crises, but also foresee them and be prepared for disruptive scenarios,” she said. “Large companies must lead this effort by innovating in risk management and sharing their experience with the rest of the business sector. For their part, SMEs must seek collaborative and affordable ways to strengthen their capabilities,” she added.

Big Spanish firms urged to help develop risk management across supply chains

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