Parima conference: Influencing the c-suite

One of the busiest breakout sessions at the Pan-Asia Risk and Insurance Management Association (Parima) conference was one that addressed the issue of influencing the c-suite.

Risk managers face three essential struggles in their professional careers—to instil risk awareness within the business and its employees, to liaise with insurers and other third-party mitigants of risk, and to get their voices heard within the rarefied air of the corporate boardroom.

They are not alone in this last struggle. Every profession is striving to catch the ear of its senior executives and to gain a direct reporting line to the very top. The benefits of realising this ambition are clear—but how is it likely to be achieved?

Fortunately, the changes to the global risk landscape, from typhoons to Trump, could work in favour of risk managers. There are a growing number of c-suite executives that realise risk is an integral part of their strategy and risk managers should be part of it, said Isabelle Clausner, global head of client management at Generali. The concern, noted Ms Clausner, is that currently this is an aspiration rather than a reality.

Reporting lines are hugely influential in terms of elevating the voice of the risk manager within corporate circles, said Ms Clausner. A recent survey by the Federation of European Risk Management Associations interviewed 600 risk managers and found that two thirds of them reported to the board or a senior executive. But there were still 16% reporting to a non-exec level.

“We see that where they sit in the organisation influences the way they report,” said Ms Clausner. “For example, in the US, most risk managers report to the group treasurer, who then reports to the CFO. Those that report to the CFO or treasurer tend to focus more on costs issues rather than the more strategic issues—that is the challenge facing risk managers.”

Another challenge for risk managers is to put themselves in the shoes of their senior executives and to align the risk management agenda and discipline with the strategic objectives of the company, said Ms Clausner. “You have to understand the risk landscape of your company and also what is important to the c-suite.”

But for any of a risk manager’s proposals to be taken seriously, they need to be credible and that means focusing on the risks most important to the c-suite. “You need to focus on the issues that keep them awake at night and ask what more you could do to reduce these risks. For example, cyber and employers’ failure to attract or retain talent are two big issues where a risk manager could increase their influence on the c-suite,” said Ms Clausner.

However, when engaging with senior executives about insurance, it is important to get beyond the technicalities, she added. The policy minutiae mean little to senior executives and there is a lot of jargon that needs translating.

Risk managers also need to educate their senior colleagues about the benefits of insurance and the risk management profession, said Ms Clausner, and insurers are there to help. “If we enter into a more in-depth dialogue, we can provide you with more support.”

For those that have developed a captive, it allows them to discuss risk management at a higher level, said Ms Clausner. “Engage with and invest in the captive and look how you can exploit insurance to develop and strengthen risk culture.

“On the employee benefits side, use the captive to develop a pension or employee wellness, tailor products to the workforce. This is very important to the c-suite because these are solutions that can generate income.”

And risk managers should be more proactive in identifying the next big risks, be they the implications of a Donald Trump presidency or the evolving cyber threat. This means more interaction with both the company’s internal business units to identify exposures and consultation with external insurers to find relevant products. For example, a decrease in trading capacity may mean there is a need for trade credit insurance.

Risk data can play a crucial role in meeting this challenge. There is more data available than ever before but the question, said Ms Clausner, is whether we are using it enough and with relevance. “It still scares people but we have to measure and model the risk. Data is a very powerful tool to engage with the c–suite but are we using it enough? Do we have the data and, if we do, what are we doing with it? If you don’t have it, it is critical that you have the data.”

But, say risk managers, insurers should be doing more to make this data available. “My struggle is getting that data to the board,” said Victoria Tan, Parima board member and head of group risk management at Philippines-based Ayala Corporation.

“Insurers—what are you doing in your innovation labs to help us with innovation?” Some risk managers feel there should be a redrawing of the landscape. “We have to reset this,” said Parima chairman Franck Barron. “It is not about the risk managers looking up to the c-suite. Forget about the tools, it is what you do with them.

“Ask the c-suite what they think about risk management and the first thing they will say is make it less bureaucratic and more business-like. So give them what they want. Take some key risks that they face and see how you can address them. Also look to challenge the insurance world. The c-suite meets with bankers all the time but how often do they meet with insurers?

“There is still a gap in the number of risk managers in Asia compared with Europe and the US. But there is also a distortion because risk management frameworks are compliance-driven in many companies. You can report to anyone—HR, legal, CFO—but it is about the type of conversation that you are having. We should stop and think about the culture of the company.”

Others agree that the formal reporting structure is less important than the quality of conversation between a risk manager and their senior colleagues. “The reporting line does not matter,” said Philippe Gourand, global head of strategic client and broker management, at XL Catlin. “It is about accessing those c-suite members that you would otherwise not have access to.”

Risk managers must be more opportunistic in terms of gaining exposure to their senior executives. For example, they should align themselves to new projects within the company that touch on big risk exposures such as the use of robotics and the threat of disruption from new technology, said Mr Gourand.

Autonomous vehicles are such an example. If the CEO of a warehousing company wants to see a demonstration of driverless forklifts, then the risk manager should be present. And then should the company go ahead with the use of these driverless forklifts, the risk manager will become much more important to the CEO for this and other projects involving new technology.