Rare breed showcased – risk manager profile

The path from the insurance industry to the corporate risk management market may be well-trodden in the US and Europe but in Asia it is not always commonplace. Many of the people responsible for managing the company’s risk and insurance programmes started off in a very different role, be that information management, security and operations or even finance and procurement.

In this respect, Antonio Kam, head of insurance, Asia-Pacific, for multinational chemical manufacturing giant BASF, is a rare breed in the still nascent risk management market in Asia.

Mr Kam has always worked in the insurance sector, beginning in 1999 as a management trainee at Royal and Sun Alliance and then continuing his insurance career at HSBC Insurance and AXA. In addition to underwriting in general insurance, he also was responsible for product development, treaty arrangement and strategic underwriting.

In 2014, he was offered the opportunity to jump the fence and manage the insurance programme for the Asia-Pacific business of BASF. “It was an attractive offer because it is a big organisation with very complex and diverse risks,” says Mr Kam. “There is a lot I could learn and that suits my personality.”

Some of the complexity comes from the sheer size and geographic reach of the company. It has more than 17,500 employees covering all regions and all the major markets in Asia-Pacific as of 31 December 2015. It also owns a number of chemical plants in Asia, including mainland China.

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So what is the difference in being a risk manager, from being an underwriter? “The technical side is very similar. It is about identifying and calculating exposures. But the thinking is different. As a customer, you are trying to encourage the insurer to take on more risk and as an insurer you are looking for a way for your clients to reduce their risk.”

As the insurance manager, Mr Kam is responsible for setting the company’s insurance strategy in Asia-Pacific as a cornerstone of the global insurance strategy. This was previously set by the global team but as BASF has expanded throughout Asia, it made sense to set up a dedicated function for the region and Mr Kam was recruited to support the growth of BASF.

“It is my job to decide how much insurance we purchase and how much we commit to retaining risk internally. We work very closely with the global insurance team because all of our insurance and risk policies have to be aligned globally and we use a mix of local and global programmes,” he says.

Many international insurers that have expanded to Asia have been surprised that many of the companies do not have global insurance programmes and instead still build their policies on a country-by-country basis. However, at BASF there is a recognition of the obvious benefits that global programmes provide, as well as an awareness of the need to use local insurance programmes where applicable, says Mr Kam.

His team has expanded since he arrived at BASF in 2014 to build his group from scratch. In addition to a full-time deputy, Mr Kam also has a representative in each country within Asia-Pacific. “I enjoy my role very much. We have investments all around the world and we are growing in Asia. This creates a lot of very different and very visible exposures.”

Insurance limits

As important as insurance is, it should not be the first port of call for a risk manager, says Mr Kam. “We look at insurance as part of the risk management concept but the first step is to mitigate the risk. At BASF there is a big focus on safety.”

And while insurance can provide compensation for any monetary value that is lost, there are other corporate properties that it cannot replace—such as reputation. And increasingly, emerging threats like cyber are exposing new risks that do not fit so easily into the traditional business model.

Nevertheless, there are risks that will always have to be transferred no matter how much effort you may make in mitigation. Natural catastrophes are a prime example, says Mr Kam—where a lot of the causal factors are beyond a risk manager’s control and the size of the exposure is too large to be retained in-house.

“The question of why we need insurance is the guiding principle in deciding what risks we transfer externally and what we choose to retain in-house,” says Mr Kam. “You have to look at the total cost of risk capital, run some calculations and refer it your balance sheet to put risks in context of the organisation. [The] definition of catastrophic risk [from one organisation to another] can be very different.”

A big challenge facing any risk manager, whether the organisation is big or small, is ensuring buy-in from senior management and from colleagues on the work floor. “We have some important values at BASF—we do not compromise on safety and that makes risk mitigation a much easier thing to sell,” says Mr Kam. “If that culture is not there, it makes it much more difficult to make the case for risk management.”

That safety culture is also important in making the case for insurance, says Mr Kam. “You have to treat insurance as an investment made to protect the company, not as a cost, and you have to clearly communicate this to the board.”

Mr Kam is part of a team covering several departments—legal, taxation, intellectual property—that regularly reports to the board on risk management matters. “I have been at BASF for two years and the risk management culture is very strong here. We are regularly reminded of its importance so all people share this culture.”

Parima role

Mr Kam is also a member of Pan-Asia Risk and Insurance Management Association (Parima), having attended the first event in 2015 and been well acquainted with many of the members. “A lot of Parima’s activities fits very well with my work. It is run by fellow risk professionals and it gives me a good platform to network with my peers.”

Mr Kam’s network of professional peers is also expanding through Parima, given that each event seems to attract new faces from different parts of the risk management spectrum. For example, a recent travel risk event held in Hong Kong attracted a number of security managers in addition to the hardcore audience of insurance managers.

This diversity is both a help and a challenge to the effort to develop the risk management function in Asia, says Mr Kam. While the input of security managers can help to inform the notions held by an insurance manager, the fact that so many companies within say Hong Kong entrust the purchase of insurance to the procurement department (pencil sharpeners one day, directors’ and officers’ coverage the next) or legal or finance, has its own limitations.

“Parima is helping to solve this issue,” says Mr Kam. “Accreditation will play a big role as it has in other markets like the US and the EU. We have also seen rating agencies look at the risk management effectiveness within organisations as a factor in deciding their rating. So there is a lot of development happening and Parima can play an important part in that process. It can bring people together because without that voice and that platform, you cannot grow.”

Lessons to other risk managers

“The first thing is to learn from your peers and build your relationships with other risk managers because different organisations will see different risks in different ways,” says Mr Kam. “Parima is a great place to be able to do this.”

In addition to networking with your peers to improve your understanding of risks outside your daily environment, risk managers should also systematically address the risks within their own organisation and clearly communicate their strategy for risk mitigation, says Mr Kam. “You need to undergo a systematic review to find the risks and exposures within your company and to put in place into a mitigation and transfer that can be easily communicated in layman’s terms. You need to clearly explain why you did what you did.”

The third area that Mr Kam highlights is emerging risk. “The world is changing so quickly. Insurance looks at historical data and creates products accordingly. But a lot of new risks have no historical data to speak of; there are no numbers. It is a challenge that the industry as a whole has to solve—the insurers, the brokers and the risk managers.”

“The world of emerging risks and the need for industry-wide collaboration may even prove to be pivotal in developing the risk management profession in Asia and the relationship with the insurance industry and other service providers,” says Mr Kam.

“Risk management is more mature in other regions and the profession still has some way to go and to grow. The innovation still happens first in the US or in Europe and then is followed in Asia. But with more regular reviews, a greater use of technology and data and the help of organisations like Parima, that development will eventually come and may well happen at a far quicker rate than we saw elsewhere.”