Business risk dominates the agenda again-Austria

This process appears to be hastened by the relentless march of globalisation as companies seek growth opportunities outside of their traditional markets. As elsewhere in Europe this widening risk landscape is forcing Austrian risk managers to rethink their role and rise to new professional challenges and opportunities, not least in the cyber world. Martin Heiss, Manager within the Accounting, Taxes & ICS Group at A1 Telekom Austria said that the biggest risks his group faces are currently not insurable. “Prices are down, competition is so high and you can’t insure that, and [we face] regulation driven by the European Union. We are a heavily regulated business and this keeps board members awake at night because you can’t insure it. But risk always presents an opportunity. As well as competition another big risk is privacy, data and compliance with the rules about this. Compliance is not something you can insure. You just have to make sure you have it in place,” he said. Michael Kleiter-Bingel of XL pointed out that there are products to deal with cyber liability risks, and better advertising of products that address related issues such as data protection legislation changes is needed.hideBut Martin Cerny echoed the thoughts of many risk managers across Europe when he said he is not sure if any cyber risk is really insurable. “Also if there is a new product this is a first step and I would imagine that it has quite low levels. But if you have experience I would think that you can increase the levels,” he said. Mr Kleiter-Bingel pointed out that about €15m in limits is currently available for the risk and the market is evolving. But Klaus Grothe of energy company Andritz suggested that, from a loss prevention philosophy, cyber is not really a risk which should be insured. “If you have a cyber risk problem you are already in trouble and can’t operate. Therefore insurance is the last line of defence. Look at cyber risk as something that destroys your reputation and that is beyond repairable. I am not sure €15m in advertising spend is enough to cope with this sort of damage,” he commented. Mr Kleiter-Bingel conceded that insurance is ‘just a start’ to address solutions for the most complex risks. He added that, for the really big companies, insurance is never enough to just protect the balance sheet without considering matters such as reputational impact. “Therefore insurers provide a starting point for a broader risk management discussion and this may, over time, lead to the availability of higher limits,” he said. Mr Grothe rejoined that he would actually not like to insure the risk because then the board would say it was too easy to manage. But, on behalf of the insurance sector, Mr Kleiter-Bingel would not give up. “No one can afford to say they don’t want it or need it as reputation is directly concerned. One cannot afford to endanger their reputation especially in this environment,” he said. Mr Köhler of ÖBB said that reputation is the ‘most important thing’ in his business, adding that the railway company has an internal service provider for cyber risk. The group has a manager for IT risks and no insurance, he said. Supply chain risk is another big business risk that has dominated discussion during this year’s survey and it was also a topic of debate in Vienna. Mr Kleiter-Bingel kicked off this part of the discussion by saying that companies are obviously aware of such risks but obtaining detailed information to help assess the exposure from an insurance standpoint is often difficult. “The risks are not new. But it is interesting that, because of globalisation, they have perhaps intensified. There is also the influence of local laws versus international laws and finding the right balance is challenging. Each company has a unique footprint that needs to be analysed,” he said. Globalisation is not a new phenomenon and Austrian companies have a long history of operating across borders because of the country’s historic and cultural links to the central European region, particularly since the fall of the Iron Curtain. But Austrian risk managers do encounter the same kinds of challenges when they operate in central and eastern Europe or further afield and it places them under the same kinds of pressures, raising the same questions about the fundamental role of risk and insurance management within the modern day corporation as for the rest of Europe. Mr Köhler of ÖBB said that in the first place risk managers have to rise to the challenge of dealing with different cultures and markets when they seek cross-border solutions, just as managers do in all parts of the organisation. “People build Chinese walls because they want to do their own thing and because they are afraid of losing their jobs. Supply chain is also obviously a big factor in this respect,” he commented. Mr Heiss of A1 Telekom Austria said that in his environment the challenge is often based on the simple speed of information exchange and communication. “This is because 20 to 30 years ago you were managing separate economies. If a company was doing something wrong, such as in the cyber risk space, this will nowadays pop up immediately. If you think of the social market, 20 years ago it was much smaller and therefore easier to communicate with and manage. Everyone today uses Twitter and scandals emerge very quickly so people get very nervous and if you don’t have the answer the newspaper will. You have to ask yourself are you exposed by your supply chain and will you be affected?” he said. “The answer is yes you will and especially if your service is not working for a period of time you will lose a lot of money,” responded Martin Cerny, his colleague at the telecommunications company. Klaus Grothe of energy firm Andritz pointed out that risk managers have to also bear in mind the opportunities as well as the challenges posed by the global, transparent and fast-moving modern economy. “We operate in a developed market and we have privileges that we may lose earlier rather than later. Pressures include greater transparency, the speed of working. Projects operate more or less around the clock worldwide. It is not just the developed world. It is now spanning across time zones,” he said. Mr Grothe also raised the important point about the impact of the web-based working model on the lives of individuals and work life balance, which should not be ignored and is leading to higher stress levels than ever before as people find it increasingly difficult to escape from work. “There is more pressure on people and the balance between relaxation and work is more difficult to manage. I appreciate the position taken by VW to shut its email down between Friday and Monday. But this is an exception. At the first and second management level it seems an accepted philosophy that you do work over the weekend but you don’t send messages until Monday morning,” he said, a point that all CRE readers will sympathise with. When was the last time you went on holiday and did not take a call or read an email from work? Mr Heiss linked this important point to the search for fresh talent, which was a recurring theme in this year’s survey. “We saw a number of scandals last year and it is fairly difficult to find the right people because the young and talented are looking at opportunities,” he pointed out. Mr Grothe said that the key question in this regard is how an individual wants to define their job and whether they are happy to remain passive or are up for looking for the most aggressive deal in the market. “If you are more involved in the discussion about risk and what the board is prepared to take then you have to ask the question. At the same time an insurance manager should challenge the board about whether they really want to take a specific business on. A company may agree to transport nuclear material from one country to another country and may be very happy with the revenue and bonuses but is it good for the business as a whole?” he asked. Mr Köhler said that Mr Grothe had raised a good example, stressing that such a discussion has to be open and underscores the fact that the risk manager really needs a good network. “You have to trust people and they have to trust you. People have to be transparent and be honest,” he said. Many risk and insurance managers who took part in this year’s Risk Frontiers survey have said that they are finding themselves more involved at a higher corporate level because of the stresses and strains caused by the economic and financial problems of recent times. The risk and insurance management team at A1 Telekom Austria is no different in this respect. Mr Cerny said the group clearly has D&O coverage and so is involved in all legal discussions with the head of the board of the main company, the owner of Telekom Austria. “This is because there are a lot of questions about reputation and liabilities, not just for insurers. Our task is wider and yes I would say that the insurance department is having more influence. There is a lot of discussion about process and you have to present information to all employees,” he explained. Mr Grothe responded by saying that this is surely the responsibility of operational people anyway and something he would see as a core part of their job. But Mr Cerny pointed out that a lot of the time it is not clear who is responsible. “So it comes to us because a claim occurs and we have to find a solution and then give it back to the operational people,” he said.

Business risk dominates the agenda again-Austria

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