Risk communication – internal and

external perspectives

Steve Fowler, Chief Executive Officer, Institute of Risk

Management

7/10/2013 1

Risk communication – internal and

external perspectives

• Communication, culture and risk

• Communication, culture and risk management

• Changing communication through culture

7/10/2013 2

Risk communication – here ?

A key factor in risk communication is

organisational culture

Different types of organisation will have

different cultures

And there can also be different cultures in different parts of the same organisation

The culture of a group

Arises from its repeated behaviours

Behaviours are shaped by attitudes

Behaviour and attitudes are influenced by culture

This impacts risk communication styles

Risk Communication

….and a model for addressing risk culture

10 Indicators of a successful risk culture Distinct and consistent tone from the top

Commitment to ethical principles

Common acceptance of the importance of continuous management of risk

Transparent and timely risk information flowing up and down

Encouragement of risk event reporting and whistle blowing

No process or activity too large or too complex or too obscure

Appropriate risk taking behaviours rewarded and encouraged

Inappropriate behaviours challenged and sanctioned

Risk management skills and knowledge valued, encouraged and

developed,

Diversity of perspectives, values and beliefs to ensure that the status quo is

consistently and rigorously challenged

Alignment with employee engagement and people strategy

How to change risk culture and communication

Risk communication – internal

perspective

Olly Reeves, Head of Risk Management, Lloyd's

7/10/2013 14

Lloyd’s as a Marketplace

7/10/2013 15

Capital

Corporation

of Lloyd’s

57

Managing

agents

88

Syndicates

Insurance

broker

Risk communication – internal perspective

7/10/2013 16

Insurance company / Group

Board

Executive

(e.g. Chief Underwriting Officer)

Management

(e.g. Class Underwriter)

Staff

(e.g. Underwriter)

Lloyd’s Corporation

• Set strategy and performance targets

• Set business plan:

• Class

• Volumes

• Price

• Oversee underwriting

• Set risk appetite

• Set and allocate capital

• Allocate underwriting authority

• Set Society level risk appetite

• Set Lloyd’s minimum standards

• Approve / reject syndicate business plans

• Approve / reject new entrants

• Set minimum capital level for members

• Impose sanctions and direct remedial action

7/10/2013 17

Risk communication – internal challenges

Adequate ‘base level’ coverage of risks

Points of escalation – how to focus for each audience in the hierarchy

Ability to focus upon those most material / key risk issues Financial vs. non-financial

Known vs. emerging

Some examples

Risk Communication in a large

industrial company

Adrian Clements, General Manager - Corporate Asset

Risk Management, ArcelorMittal

7/10/2013 18

Risk Customers and their needs

Investors

Governments

Board members

Sites

Insurance Companies

Corporate Governance

Rating

agencies/NGO’s

7/10/2013 19

Their needs are different

Their appetites are

different

So are they changing the

risk mapping of

ArcelorMittal?

What is our risk?

One stop shopping? NO!

Tailor made solutions for

each

Investors

Pushing for water risk management

Plants

Pushing for meeting business plan needs

Corporate governance

Influenced by rating agencies who look

at water, CO2, environment

Board

Best return on investment,

improving market share

Forex

Governments

Looking for sustainability,

image, best practise, compliance

Insurance companies

Risk of fire explosion, business interruption, cyber

7/10/2013 20

We are changing our

communication to suit the

individual needs of our

stakeholders

This is only possible if we have

a robust consistent

methodology for risk

identification and assessment

and a clear appetite approach.

Eg – Insurance - the risk to our main power transformers is not fire but delivery time of a new unit. Thus sprinklers is not the solution as it does not reduce delivery time.

Does the stock market know enough to put a

price on the juggling act of most companies?

Transferred? Managed?

7/10/2013 21

Hedged? Taken?

Entrenchment? Sustainable?

Black swan

Europe technology

Reduced? robust

Time Horizon

10/7/2013

• Three levels of risk management:

• Plant, Company and Economy

• Expanding complexity of the risk universe in relation to the economy makes communication challenging

22

• Appetite is changing depending on location, country product and world growth.

• Companies are divided between share/stakeholder value and customer need

10/7/2013 23