Risk awareness rising in Italy… …but ERM not quite there

Italian companies are more aware of the need to implement enterprise risk management policies following the recent financial and economic crisis. And they are also more willing to involve risk managers in processes that are fundamental to good governance systems.

But there is still some way to go in this area if Italian firms want to catch up with their peers in other countries, according to participants in the annual conference of Associazioni Nazionale dei Risk Manager e Responsabili Assicurazione Aziendali, ANRA, Italy’s risk management association.

The meeting, that gathered hundreds of risk management, insurers and other professionals in early November in Milan, focused on the challenges and opportunities created by good governance requirements for risk managers of Italian companies. Peter den Dekker, President of FERMA, was one of the key speakers invited for the day-long event.

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The conference stressed advances made by Italian companies in the field of ERM and the role played by risk managers in the implementation of improved governance policies. The subject is a hot one because more has been asked of Italian companies in terms of governance in recent times.

“To have a governance system is quite important, and recent events have highlighted this need,” said Marco Terzago, Corporate Property Risk and Insurance Manager, South-Europe & Asia, at SKF Industrie and Deputy Chairman of ANRA. “It is clear to everybody that, in this interconnected world, it is essential to have an efficient governance system in place,” he added.

The participation of risk managers in this process is on the rise, although it is not always clear to what extent they can influence governance policies. “Governance systems remain very fragmented in Italian companies, and in many cases risk managers are not deeply involved with them,” Mr Terzago pointed out. “Often they are only partially involved, and sometimes even not involved at all,” he added.

Enterprise-wide risk management strategies have become a crucial part of the activities of many Italian companies. But it is not unusual that, despite this, risk managers have less influence than they would like to have, according to ANRA members.

“Italian companies have become more aware of the need to implement ERM policies,” said Jorge Luzzi, Corporate Risk Management Director at Pirelli, and board member of ANRA and FERMA. “But it doesn’t mean that risk managers accumulate all responsibilities in this area,” he said.

However, for all the difficulties that still remain, it seems clear that the role of risk managers is becoming more relevant in their companies, and that includes governance-related matters. “Public firms have been facing ever stricter risk management requirements concerning public tenders and procurement,” Mr Luzzi said.

“For their part, private companies have been more worried about their reputation and damages to their public image.” Participants in the conference also agreed that risk managers are increasingly being consulted by boards on subjects that, in previous times, their opinions would not have been usually sought.

But there is still plenty for Italian companies to do to catch up with their peers in northern Europe, said Mr Terzago. “In Italy, risk managers who come from an insurance background, or who also have the responsibility for insurance transfer, are not seen as Chief Risk Officers. In many companies, there is still a division between real enterprise risk management and insurance,” he noted.

“Financial turmoil increased awareness about the need to manage risks in a more holistic way, and to integrate governance with traditional risk management. But in Italy only very large corporations are already doing this. A more global approach to enterprise risk management remains a work in progress,” Mr Terzago remarked.

In the second part of the conference, risk managers took part in workshops with insurance companies that presented them with solutions that they believe could help them to implement efficient ERM policies in their own companies.

For example, AXA Corporate Solutions presented tools to help risk managers make risk analysis results more accessible to managers who do not have technical knowledge on the subject. HDI Gerling and Generali stressed that insurance companies have to provide risk managers with advice as well as with insurance products.

“There was much interest in the workshop about supply chain risks, which is a real issue for Italian companies,” Mr Terzago said. “In Italy we source all our raw materials abroad, and we’ve been buying them in growing quantities from China, India and other emerging markets. By doing this, sometimes we introduce risks in our companies, and these risks need to be managed,” he pointed out.

An important development in this particular area was the launch last year of a supply chain insurance coverage aimed at small and medium-sized companies, offering an option for firms that are not big enough to transfer their risks to the reinsurance market, he said. “Even small and medium firms have exposures to supply chain risks,” said Mr Terzago.

According to Mr Luzzi, insurers and brokers in Italy have been striving to meet clients’ needs, but companies have been demanding much more advice related to ERM.

In terms of premium prices, he believes that no dramatic hikes should occur in most commercial lines during the next round of renewals. “The greatest problem in the Italian market today is credit insurance,” Mr Luzzi said. “But traditional business lines still are going through a soft market,” he concluded.