Risk managers urged to increase involvement in M&A’s

This was the key message to come out of a workshop on the second day of the 20th Rencontres d'AMRAE in Deauville that focussed on the main risks involved in M&A's. Risk managers must make use of the critical moments in the process where they can apply their expertise, in order to defend the interests of their companies and raise their profiles within organisations, experts at the workshop urged. But the audience was warned that companies still keep risk managers isolated from many deals.hideBoth insurable and non-insurable risk can be identified by risk managers in M&A activity, the experts said. But their expertise can become particularly prominent when dealing with the former, they added. “Insurable risks provide an important point of entry for the risk manager, who can then make use of this platform to expand his influence towards the other risks too,” said Rachel Balmadier, the Head of Internal Control, Risk and Insurance at Compagnie des Alpes, a company that specialises in the acquisition and management of ski resorts. Tools are available in the market to transfer risks, noted Charles de Mombynes, a Financial Lines underwriter at Zurich. Companies can buy protection for instance against transitional risks, protecting themselves from unexpected losses that can result from the merger process. They are complex products, he said, but they also help risk managers to add value to a merger or acquisition. Nicolas Mason, the Head of Insurance at the Oberthur Technologies Group, said he regretted the fact that risk managers do not deploy their risk transfer tools more often when M&A processes are under way. This is a domain where lawyers and bankers still dominate, he added. Mr Mombynes agreed. He said that he has seen cases at large companies where risk managers have not been involved, even in the activities related to the purchase of insurance to protect against potential losses caused by the transaction. More involvement from risk managers throughout the process would be welcomed, assured Hugh Scalbert, a partner at law office Gide Loyrette Nouel. Plenty of risks can be identified in the course of the process, he added. “Risk managers have the vocation to intervene right along the process,” Mr Scalbert pointed out. He highlighted risks linked to a company’s brand and reputation, which can be harmed when a firm is targeted by a rival, as an area where risk managers can prove their worth. The M&A process offers plenty of opportunities for things to go wrong, he said. These range from legal squabbles to regulatory approval. Franck Baron, the General Manager of International SOS, a healthcare services group that has recently gone through a merger, suggested that a risk-mapping exercise should be performed before an acquisition takes place so that possible threats can be identified and evaluated before the process gets fully underway. “But we do not always have the time do this,” he conceded. The experts recommended risk managers become involved in the process before lawyers and managers begin legally required due diligence activities. Mr Baron also pointed out that the earlier risk managers become involved the more likely they will be able to stop the whole process in cases where it is necessary to do so. On the other hand, it is really difficult to block any merger or acquisition once due diligence is under way, Mr Scalbert remarked.

Risk managers urged to increase involvement in M&A’s

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