From the top down – Turkey

CRE: What are the three biggest risks your organisation faces over the next three years and why? MURAT GÜSAR: I would say political and economic stability is the most important risk. It has always had the potential to affect domestic markets and will continue to do so. Also critical are the hot issues along the southeastern Turkish border. Problems in countries like Syria and Iran create a threat to sustainable growth and peace for Turkey and its companies. Our total group sales contributed 9% of Turkey’s gross domestic product in 2011, and exports made up almost 10% of Turkey’s total exports in 2012. Our share of the capitalisation of the Istanbul Stock Exchange was 16% at year-end 2012. As a company of that size, it is vitally important that all of our businesses and assets are properly protected, and therefore properly insured. In light of this responsibility our biggest risk is earthquake. At the moment capacity for nat-cat cover is limited, if it is available at all, and the cost is high. As Turkey is an earthquake-prone country we put great effort in providing the coverage for our companies’ assets. Therefore, I would name natural catastrophes, and earthquake in particular, as the second most important exposure for us.hideChanges and transformation within the Turkish insurance market is another risky area that we are closely monitoring. We believe that fierce competition is coming to an end now and within a few years will be followed by consolidation of insurance companies. CRE: Do CEOs and boards generally take risk management seriously and understand the benefits, or is it a tick box/compliance function? How can senior management be persuaded to ‘buy into’ the concept of enterprise-wide risk management? MG: In all this rapidly changing environment we are exposed to various risks that attract senior management’s attention. It is critical for senior management to first be informed about such risks, then to prepare accordingly. I believe that in Turkey, in groups similar to ours, risk management is taken very seriously and is widely applied, although one can argue whether it is applied appropriately or competently. Big Turkish companies are familiar with enterprise risk management and apply it in various ways. It is still developing and the learning curve is quite fast. ERM is more difficult for smaller companies as the stakeholders and professionals there have not reached the same level of awareness as in large companies. CRE: How can risk managers ensure that risk management is properly carried out at line manager level throughout a group and in overseas locations? In other words, how can it be truly embedded in a global corporation? MG: This can only be achieved from the top down. From the shareholders to the CEO and board, everyone must speak the same language, they must be aligned with the risk management approach and must show to the line managers that they really do own the concept. If not, risk management becomes a matter for the risk manager alone, and he or she would be lost after some time. CRE: Would the creation of a globally recognised, formal risk management qualification help convince senior management of the value of the function and raise the influence of the risk manager? MG: Such a qualification would help in convincing senior management. However, a lot of thought should be put into what this qualification should contain. Standards of the programme should be designed in such a way that holders of the qualification and their expertise are acknowledged across the globe. CRE: Should the risk manager of a global corporation also be in charge of insurance management or should the functions be split. Does insurance management hold risk management back, or vice versa? MG: Not necessarily. However, if they are split, there should be strong, sound and uniform cooperation, coordination and communications between the risk and insurance manager. To a certain extent I would agree that insurance management holds risk management back, especially if the scope of coverage and conditions are broad, and coverage is at a lower cost than alternative mitigation solutions. Those conditions can create a comfort zone for those involved in the process and may cause them to delay certain risk management actions that should have been taken. CRE: Is corporate insurance currently good value? Are there coverage availability gaps and is there anything the insurance market can do to make the uninsurable more insurable? Can risk managers help create new coverages? MG: The answer is yes, but insurance cannot cover all risks. There are capacity issues, geographical restrictions or international sanctions. And some risks are simply uninsurable. Insurers should work harder to adapt their products to meet the changing needs of clients. Risk and insurance managers do force the market in this direction together with the international insurance/reinsurance brokers, but more interaction and empathy with clients is really vital if insurers wish to be more proactive. CRE: Are you happy with the coverage offered for cross border risks, such as global programmes? What can be done to make global programmes more compliant, consistent and cost-effective? MG: We have one global programme that covers many locations and jurisdictions around the world and, at the moment, meets our expectations. Of course, we need good support from our stakeholders—insurance carriers, brokers and local people –about the changes in these countries as soon as they happen or even before they happen. As part of this a strong presence and competence of insurers in resident countries is required. CRE: Is it time to end the annual renewal process, as some say it maintains a short-term, commoditised approach to the business of insurance? MG: I do not expect that the annual renewal process will come to an end. Long-term policies may be necessary for certain types of businesses, but because of market dynamics, each party—insurers and clients—would like to maintain annual policies. CRE: Does the global risk management profession need a stronger global lobbying voice? Should Rims, Ferma and other associations work more closely through Ifrima to make sure the voice of the risk manager is heard? MG: Definitely. Organisations such as Rims and Ferma form a pool of experts –professionals and practitioners—where information, data, expertise and best practices are accumulated, exchanged, developed and finally distributed to various stakeholders. From these activities certain standards and common definitions are recommended to governments, local authorities and public and private companies, which in turn tend to benefit.

From the top down – Turkey

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