Time to take the lead: Dirk Wegener

Adrian Ladbury interviews Dirk Wegener, president of Ferma, as our annual Risk Frontiers Europe survey builds momentum. He believes that the risk and insurance management community is ready to rise to the challenges and opportunities presented by the new state of ‘perma-crisis’. Wegener agrees with his peers that the insurance sector also needs to up its game at a faster pace and, ideally, with more innovation, not least to help with the green transition.

Adrian Ladbury (AL): A rising number of risk managers taking part in our Risk Frontiers Europe survey say that political risk is now near the top of the agenda. Would you agree, and what should risk managers be doing to help their organisations deal with this risk in practical terms?

Dirk Wegener (DW): The constantly shifting geopolitical environment is inevitably pushing the issue of political risk further up the corporate agenda, particularly given the potential long-term repercussions of such risks on multiple aspects of businesses, ranging from supply-chain disruption through to the increased threat of cyberattacks.

In Ferma’s view, such adverse developments should act as a catalyst for greater interaction by the risk manager at the strategic level, feeding directly into business-critical decision making as organisations try to navigate this increasingly complex political environment.

This is very much the focus of our 2023 theme of ‘Be Risk Leaders’, which promotes greater integration of the risk manager at that c-suite level. Managing such a volatile political landscape requires that direct input, particularly given their unique position within any organisation and the fact that they are constantly monitoring the risk horizon.

We need to see the profession playing much more of a lead role in how companies look to sustain their operations and maintain their competitiveness in such a charged environment.

AL: What is top of the agenda for Ferma currently? What are the big regulatory and legislative matters that you need to focus on – risk reporting, supply chain due diligence, collective redress etc?

DW: Ferma members are currently addressing a range of sweeping regulatory changes that impact many of their organisational activities. As the representative body for the European risk profession, our advocacy remit spans a significant number of legislative developments.

These include:

The EU Climate Resilience Dialogue. Our goal is to help our members understand the financial and environmental impacts of climate change and work towards achieving a joint strategy to prevent and mitigate these risks. Further, we are focusing on asymmetries within the insurance market to help reduce the protection gap and help enhance disaster resilience.

The EU Cyber Resilience Act & Cyber Solidarity Act. Ferma is assessing the EC’s cyber package proposals and promoting market-wide dialogue on issues relating to the lack of awareness and insurance coverage regarding cyber risk. We are also developing and promoting strategies for cyber risk management resulting from the rising threats from geopolitical tensions and the increasing digitisation of key infrastructures.

The Critical Raw Materials Act/Net Zero Industry Act. Ferma is examining the possible risk management and insurance implications of the ‘new’ industrial competitiveness strategy of the EU and the supply chain implications for companies within the EU.

AL: The whole field of ESG is rapidly rising up the agenda and risk managers are increasingly becoming involved. How do you think risk managers can add value to this fast-evolving area and in what way should they become involved?

DW: Risk managers have a key role to play in enabling companies to meet ESG objectives and ensuring compliance with an expanding range of ESG-focused requirements.

While we have seen a significant increase in regulatory pressure to demonstrate ESG credentials, a key challenge is that there is still a degree of subjectivity in how these requirements are being met. There is clearly a need for a more standardised approach to reporting on ESG-related measures, as well as more defined KPIs for how companies can measure their performance.

We have seen a growing number of (re)insurers announce they will not be providing cover for projects that do not meet their ESG criteria, such as those related to the extraction or use of fossil fuels. However, we have also seen leading market practitioners exit the Net Zero Insurance Alliance (NZIA), citing concerns over the ability to help clients manage the transition effectively.

From the risk manager perspective, choosing not to do business with a particular insurer due to their particular ESG stance at a time when capacity is still limited is a difficult decision to make.

It is Ferma’s view that the insurance market should work to establish a stronger partnership with their corporate clients to facilitate the transition to net zero. Companies are facing challenges relating to limited coverage, a growing number of policy exclusions, and a lack of solutions for new technologies and materials designed to support this transition.

We need to see greater collaboration to support companies that are clearly embracing the green transition that enables a more holistic approach to addressing associated risks. It is essential that all parties work to develop a more balanced approach if we are to successfully navigate the route to net zero.