Raw materials, political instability and macro economic conditions dominate German risk agenda–Germany

Volatility in the supply and price of raw materials, political risk and continued European macro economic uncertainty are the big risks that keep risk managers and their board members awake at night in Germany. Regulation and cyber risk are also big concerns and topics of discussion within leading German companies. Cyber in particular remains difficult to define and quantify given the media hype surrounding this new threat. These were some of the key findings on the big three risks facing German companies, according to DVS committee members interviewed late last month. Insurance availability or capacity did not get a mention because, as revealed later, Germany’s risk and insurance management community are currently offered plenty of capacity at highly competitive prices.hideThere are areas where German risk and insurance managers would like to see broader, deeper and more tailor-made coverage. But the focus for German companies is currently clearly on broader, macro economic risks. This is good news for the risk and insurance management community because it means that they are more involved in boardroom level discussions about wider risk management and not just insurance management, according to the group who took part in this year’s roundtable at the DVS AGM on 24 April. Dr Eberhard Faller, DVS Committee Member and Head of Corporate Insurance for chemicals company BASF, based in Ludwigshafen, was clear that big picture risks are currently at the forefront of risk manager’s minds. “The development and price of raw materials is a constant but currently a bigger worry to address. Also the company is concerned about political risks and demographic development in the long run. You can add to that macro economic developments, especially in the former stronger Bric countries,” he said. Dr Faller said that BASF, like most multinational companies nowadays, operates in countries where there is a growing tendency towards political and social challenges. This has recently impacted investment projects. For Germany-based global automotive supply group Continental, raw materials are an obvious concern. “For us a big worry is the prices of raw materials and supply chain management. We are also worried by geo-political instability, especially in Russia. To a lesser degree we are worried about cyber. The media suggests that this would be the biggest catastrophe, but we are really more worried about the price of raw materials which can swing 200% a year!” said Klaus Braukmann, DVS Committee Member and Risk and Insurance Manager with Continental AG, based in Hannover. The basic forces of supply and demand are the cause of this volatility, said Mr Braukmann. But, to an extent, this can be balanced by other factors such as falling oil prices and the US dollar exchange rate, which is favourable. The problem is that such forces cannot be controlled and are difficult to manage, a position that no risk and insurance manager likes to be in. Dr Faller said that it is possible to hedge such risks naturally through diversifying sources of supply by using factories in different countries and regions. However, the lack of control is still a problem, he said. Christian Böhm, DVS Committee Member and Risk and Insurance Manager with Freudenberg & Co, in Weinheim, agreed with his colleagues and added IT security and intellectual property (IP) protection to the list. “For us it’s the same risks that we worry about—raw materials, political instability in certain areas and economic problems, particularly in southern Europe, Argentina and Brazil. Also we think IT and IP is important. This is not the same as cyber risk or insurance of cyber, it is about the protection of the company’s core assets, the crown jewels if you like. The main concern in this regard is espionage,” explained Mr Böhm. Heike Hehr, Secretary of the DVS and Head of Insurance at K+S Aktiengesellschaft based in Kassel, added regulation to the list. “We are worried about energy and logistic costs and currency fluctuations, but in our specific field regulation is a concern. Our mining production takes place in Germany and it is not so easy to operate in this sector nowadays. Environmental protection is a major concern for all companies in this sector,” she explained.

Raw materials, political instability and macro economic conditions dominate German risk agenda–Germany

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