Parima conference: Innovating through risk

“What am I doing here?” was Mr Yeung’s opening statement. Given that his next statement was “I am the least risk averse person in the room,” the risk managers in the audience may have wondered the same.

“I look at risk a little differently. I have never had a risk manager. We would end up fighting all the time. In truth, many startups are too small to have a full-time risk manager. I would go to my compliance guy if it made sense.”

In Mr Yeung’s opinion, corporates do not have innovation in their DNA. Instead, they could invite startups to work with them and possibly learn some things and gather value from the experience.

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Innovation and risk management are typically viewed as uneasy bedfellows. However, while risk managers have long lambasted the lack of innovation within the insurance industry, they must also look within their own organisations to ensure that they are fostering and not obstructing innovation.

“It is important in business that you are not standing still,” said Gill Meller, legal director of MTR. However, this is easier said than done, especially for large businesses with huge potential public liability such as a national transport provider like MTR. “Safety is critical to our business so we do want some people to stick to the process and not start driving the trains in a different way. But we also do not want to kill off innovation.”

It is increasingly common for corporates to set up innovation labs, particularly in the banking sector, which act as separate parts of the company, subject to different rules and expectations in order to create a different mentality.

To this end, MTR has set up Hacktrain in the UK, says Mr Meller. The participants are given all the data that the company has on customer complaints and they then go away and come up with ideas for new services. “If we can use some of that for the company that’s great, but it is more about encouraging the staff to see a different way of thinking and to tap into that startup mindset.”

For a privately held technology and engineering company such as Huawei, there are fewer restrictions and more freedom to innovate, said Pierre Noel, enterprise chief security officer at Chinese telco Huawei and Parima treasurer.

“We don’t care about forecasts. We can take decisions but we can also backtrack. If we were a listed company our share price would plummet, but we an engineering company with 75,000 people employed in R&D – so innovation is in our DNA. If a new idea works, great. If not, that’s fine as long as we learnt something.”

Huawei does not have a formal chief risk officer or risk manager – Mr Noel would be the closest thing to it, he conceded. Nor does Huawei have innovation key performance indicators for its research and development staff. Everyone is subjected to a success/failure ratio for new ideas but, said Mr Noel, no one will be demoted for having a ratio below 50/50.

“Our attitude is ‘let’s do it and worry about the implications later’,” said Mr Noel. There is a similar attitude to compliance – an acceptance that to be 100% complaint at all times is not possible for an engineering company striving for innovation. And if issues do arise, particularly around data security or data privacy, then it is Mr Noel’s responsibility to ensure that they get fixed. “In essence, we are building the plane as we are flying it.”

It is an analogy that would be alarming for some, not least the moderator of this panel debate, Parima general secretary and former risk manager for Cathay Pacific, Steve Tunstall.