New risks mounting from  pandemic fallout, warn French risk managers

The pandemic’s impact is beginning to spin off into new areas of risk, warned a group of French risk managers meeting as part of CRE’s Risk Frontiers Europe 2021 survey. They said political risks are already on the rise, as the likelihood of political change grows. Cyril Lelarge, head of corporate insurance at Sanofi, was among those voicing concern. “There will be a whole series of consequences, which we are already starting to see, including political insecurity and political changes. There have been strong social impacts from the pandemic,” he said. “And we will face bigger economic and social impacts as governments look to relaunch economies… There will be reputational consequences as companies navigate through more changes ahead – it will be a challenge,” he added. Marie-Elise Lorin Smacl, head of the western AMRAE region and risk manager at Smacl Insurance, said she is heavily involved in risk strategies for her organisation rather than day-to-day risk management. She said her company is increasingly factoring cyber and climate change into its thinking. “We have had to increase provisions for those risks, and prepare ourselves for the possibility of some major claims in both those areas,” she said. Ms Smacl hopes that the state will intervene and take some of the risk away from the private insurance market. Without that, she said, it will become almost impossible for small insurers to survive and they will have to merge into larger groups, ultimately reducing choice for insureds. Zaiella Aïssaoui, insurance and risk director at Bouygues Construction, worries about the possibility of a worldwide blackout, caused either by a cyberattack or a natural event. The good news is that risk managers are already working on such risks and have the respect and ear of senior management, she said. “Risk management is already important in our company and insurance and risk has a place in the strategy and decisions of our company’s business development. The pandemic has demonstrated that a big risk could come from external decisions and that the organisation of activities must adapt very quickly to survive,” she said. François Malan, chief risk and compliance officer at Eiffage, said we are not out of the woods when it comes to the pandemic despite vaccine rollouts, and noted several knock-on effects from the crisis. He said human resource challenges are a consequence of home working and the changing nature of companies as they struggle to survive through the pandemic and into a post-pandemic world. Mr Malan is also concerned about climate change and the impact this might start to have on business globally in the next few years. However, he is confident risk managers are alive to these challenges and ready to react. “Covid-19 boosted risk management because our tools – business continuity programmes and crisis management etc – and our mind set – be positive and efficient to manage a crisis – helped our organisations to face the pandemic,” he said. But there are lessons to learn from the crisis, said Mr Malan. The pandemic showed up weaknesses in supply chains, for example. Even now, he said the construction sector is struggling to get some supplies. Mr Malan also worries that many economies across the world are in a weakened state, which could well lead to poor investment results and to failures. Oliver Wild, chair of French risk managers association AMRAE and chief risk officer at Veolia, said companies can do little more than watch and wait to see how particular governments react. “We don’t know whether a government will become more flexible to encourage the economy to grow, or whether it will tighten fiscal policies to collect money from those who have it. Companies can be prepared but there is little they can do to influence those decisions,” said the chief risk officer. “Geopolitical tensions will be increased – for example tensions between China and others. But also, different countries fared differently in the pandemic – much of Latin America really struggled, for example, and we may see political upheaval in the near future,” he added. The twin risks of cyber and the economy are firmly at the top of the risk list, agreed the risk managers. Philippe Cotelle, board member at AMRAE, vice-president of Ferma and risk manager at Airbus Defence & Space, stressed the importance of companies recognising that risk management is about more than simply reducing insurance costs. “Risk managers should help the company develop some form of resilience. We can provide a check and a challenge to top management on how to behave. We can help improve the capacity of any company to absorb a systemic shock,” he said. The risk managers said all companies now understand the impact of a major shock, which has been one of the greatest lessons learnt from the pandemic. They ultimately agreed that companies can no longer afford to ignore low-probability, high-severity risks.

New risks mounting from  pandemic fallout, warn French risk managers

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