Emerging from the risk management cave

The succession of crises and uncertainties that have spooked companies in recent years have given risk managers a new relevance in Portugal, according to participants in this year’s Risk Frontiers Europe roundtable in Lisbon with Portuguese risk and insurance management association Apogeris. Risk managers have been asked to deal with a broader range of topics and have been more involved with activities in other parts of their organisation, in what one of the participants described as getting out of the risk management “cave”. “Portuguese companies are taking more seriously the adoption of a strategic vision of risk management, among other reasons due to pressure from the European Union to do so,” said Jorge Luzzi, president of Apogeris and former president of Ferma. “The future is positive for the risk management function of organisations… This vision on risk management is also beginning to be applied to medium-sized companies,” added Luzzi. It has not been an easy process though. Risk managers have had to prove their worth in daily activities as they went through a series of unforeseen events. Inflation, high interest rates, the Russian invasion of Ukraine and other factors have contributed to keep everybody in risk management departments busy. "The trigger of change was the pandemic. It put the work of risk managers in the spotlight. In order to become reality, a material event was required. We hadn't had an event like the pandemic for a long time; the latest strong earthquake to hit Portugal happened in 1755, large floods in the 1980s, so risk management sounded like a theoretical exercise,” said Jorge Neto, the insurance manager at retail group Jerónimo Martins. “Then, when we started to leave the pandemic behind, we have had to face a war that is still ongoing and the highest levels of inflation in the last decades. And something else will happen in the near future that we are not yet aware of,” he added. “In the last couple of years, we have lived through several disruptive major events. That was what happened with the pandemic and now with the war. And then there is climate change, which gives us no pause. Events that looked less probable now are more likely to happen,” said Pedro Cupertino de Miranda, the risk, cyber security and data protection officer at retail group Sonae. “The impact of those risks has been so big that it no longer makes sense to think in one-year cycles. Things happen very quickly, there is so much volatility that when we finish drafting our risk matrix, it is already out of date,” he added. Cupertino de Miranda continued: “We went from eight to 80 in terms of the perception of risk. Like never before, not even during the pandemic, people are talking about contingency plans, risk matrices and risk management.” Evident value One of the outcomes of the turmoil is that the value of investing in risk management has become clearer for everybody to see. “Companies noticed that those that had more mature risk management plans kept on working,” Neto said. “In the retail market, we were able to maintain our operations, we faced no interruptions. The group recognises that value has been added." In fact, Cupertino de Miranda noted that the pendulum may be moving a tad too far the other way as a result of the recent turmoil. “What happens today is that risk management tops the business leaders’ agenda and we have to keep our added value, but that is sometimes very hard as there are many requests about a wide variety of issues. This brings us some difficulties. But we may reach a point of equilibrium eventually,” he said. “To express how the function evolved after the pandemic, it was like before and during it we worked in a cave,” said André Rodrigues, who works at BNP Paribas in Portugal. “People knew we existed, that we did something, but nobody knew exactly who we were, how to get in touch with us and when we would show up. Now we moved to the entrance hall. We are often part of the entry point for the implementation of new projects,” added Rodrigues. This has all combined to stress the value added by the risk function and boost the position of risk managers in their companies, agreed the risk professionals. “This is an extraordinary opportunity for risk management teams. One of the challenges that we face right now is to understand how to make the best of this opportunity, so that risk management is implemented in a more sustainable way in our businesses,” Rodrigues said. "Risk management is now more involved in the strategy of the organisation. Risk managers are called upon to contribute actively to the company's performance. We are not lacking work,” added Tiago Antunes, head of risk management at Metropolitano de Lisboa, the transportation company.

Emerging from the risk management cave

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