Leading risk culture change webinar

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  • A Key Risk Indicator for many retail businesses is the price of gas. When gas prices rise, the number of potential customers might drop. Business owners can offer discount coupons to offset the price increases and get customers visiting again.
  • How can you deal with risks that you don’t even know are there? Zurich’s Total Risk Profiling methodology gives you the tools you need to help identify the broad spectrum of risks your customers face – whether physical, financial, reputation, regulatory and more. Total Risk Profiling (TRP) can help quantify the largest impacts, then prioritize and implement risk monitoring processes to ensure sustainable practices and resilience solutions are embedded in the organization. Zurich Total Risk Profiling can supports your customer’s business with… • A systemic, top-down risk identification, quantification and prioritization process • A practical approach blending financial and technical risk management disciplines • Risk analysis of projects or new ventures to assess regularly the issues in the project that could keep it from achieving targets and timelines • The collective knowledge of experienced, in-house personnel applied to risk prioritization and improvement, to help ensure risk “ownership” for solutions TRP can make your risk management culture more effective across your enterprise in various ways such as: • Strengthening your business performance through an integrated method for ongoing identification, communication and mitigation of your risks • Embedding a strategic planning process for enterprise risk management or for specific business decisions like product launch, acquisitions/divestitures, HR or project management • Facilitating strategic, operational and organizational change to put your risk awareness to practical application in productivity and profit
  • When is the best time to perform a hazard analysis? As early in the lifecycle as possible Process changes or retooling occurs and new equipment comes in, your organization just inherited risks associated with that new equipment. Do you know what they are? Are those risks within your organization’s tolerance? Will retrofitting them cost you or the supplier? What if Hazard analysis was performed before you took ownership of equipment to ensure hazards and risks were identified and addressed in a consistent manner? Have supplier identify and fix before assuming risks. Reduce total cost of risk
  • C:\Documents and Settings\chy5484\Local Settings\Application Data\Office\Macros\Ppt_ci\Templates\Pres_blue_on_white.pot
  • External environment: As economic, political as social environment is important IT and internet linked evolutions Reputation ans a result of media implication Marketplace linked risks M&A competition, regulatroy, IP, …contracts Internal : communications, transport links, supply chains, terrorism, people skills, H&S, IT systems
  • Strategic and operational with in between tactical level Important to build fluent transparency and communication between alll these levels
  • C:\Documents and Settings\chy5484\Local Settings\Application Data\Office\Macros\Ppt_ci\Templates\Pres_blue_on_white.pot C:\Documents and Settings\chy5484\Local Settings\Application Data\Office\Macros\Ppt_ci\Templates\Pres_blue_on_white.pot Mismanaged exposure can cost you money and shareholder value, and prevent you from taking advantage of the opportunities that drive innovation and growth. A solid business resilience framework helps you to identify your key exposures and risks relevant to your business objectives that can threaten your viability. How well does your company understand its risk landscape, supply chain exposures and other business interruption risks emerging in the current operating environment?
  • Leading risk culture change webinar

    1. 1. Leading Risk Culture Change Linda Conrad Director of Strategic Business Risk Zurich Paul Walker Zurich Chair in Enterprise Risk Management St. John's University Johan Willaert Corporate Risk Manager Agfa Corporate Center MAY 15, 2013 Sponsored by
    2. 2. Questions? OCTOBER 17, 2012 To ask a question … click on the “question icon” in the lower-right corner of your screen.
    3. 3. Linda Conrad Director of Strategic Business Risk Zurich Sponsored by Leading Risk Culture Change MAY 15, 2013
    4. 4. Paul Walker Zurich Chair in Enterprise Risk Management St. John's University Sponsored by Leading Risk Culture Change MAY 15, 2013
    5. 5. Johan Willaert Corporate Risk Manager Agfa Corporate Center Sponsored by Leading Risk Culture Change MAY 15, 2013
    6. 6. Leading Risk Culture Change Linda Conrad Director of Strategic Business Risk Zurich Paul Walker Zurich Chair in Enterprise Risk Management St. John's University Johan Willaert Corporate Risk Manager Agfa Corporate Center MAY 15, 2013 Sponsored by
    7. 7. INTERNAL USE ONLY • The culture must support challenging leadership on critical elements of strategy • Over time, it will become an engrained process • ERM can eventually be used more tactically • Approach becomes consistent across the business • Engages the entire organization in risk awareness • High performance operating model achieved • Organization can consciously increase risktolerance levels to profit from prudent risks Culture is key to turning risk into reward The o nly re alm istake is the o ne fro m which we le arn no thing . - Henry Ford
    8. 8. INTERNAL USE ONLY 8 Enterprise risk requires leadership Maximize growth opportunities Betterinformed decision- making Optimize riskand opportunity balance Reduce volatility in business results Identify and manage key exposures Decrease total cost of capital by increasing risk transparency
    9. 9. INTERNAL USE ONLY 9 Steps to leadership in ERM Set action plan and follow-up / review periodically5 Gain support from Senior Management1 Define the scope of initiative and communicate2 Map key strategic risks and vet with stakeholders3 Conduct strategic risk assessments to prioritize risks and opportunities4 Incorporate into strategic planning cycle
    10. 10. INTERNAL USE ONLY • More than just an ‘Executive Sponsor’ • Should be driven by the CEO and / or Board of Directors • Must be a recognition of the value to the organization • Perfect opportunity to be introspective about past / current strategy, and key lessons to help repeat successes and avoid failures • Encompasses Risk Management / Insurance function • “Top-down” approach maintains strategic focus Gain support from Senior Management1
    11. 11. INTERNAL USE ONLY • Will ERM be undertaken company-wide? At the BU level? On specific project(s)? • Who are the key stakeholders in the initiative? • What is the organization’s risk appetite? • What time horizon will be examined? • Objectives must be defined: How will success be determined? • Metrics should be embedded where possible to: - Measure success / failure rate - Support an early warning system – ‘Key Risk Indicators’ • Plan communications to key stakeholders – share results (successes and failures) Define the scope of initiative and communicate2
    12. 12. INTERNAL USE ONLY Map the key strategic risks and vet with stakeholders3
    13. 13. INTERNAL USE ONLY Conduct Total Risk Profiling assessments to prioritize risks and opportunities4 Increasing risk IIIIIIIV F E D C B A Frequency Severity INCREASIN G RISK • Strategic Risk Assessments seek to: • Identify • Define • Assess • Manage • Very important to visualize risk levels • Supports prioritization of risks and opportunities • Variety of methods and styles, and must be tailored to the organization
    14. 14. INTERNAL USE ONLY Set action plan and follow-up / review periodically5 • Strategy and risk management actions should be set in parallel • Actions should focus on most critical risks or largest opportunities • Leadership should evaluate the anticipated effectiveness of risk improvements • Ownership and accountability are key – close the gap • Review is critical: - At set intervals (quarterly, biannually, etc.) - As significant change is experienced (leadership, underlying assumptions, objectives, etc.) • Measure! Measure! Measure!
    15. 15. INTERNAL USE ONLY Culture change demands a C- shiftTM State of the Union: Mismanaged risks cost money and ultimately loss in shareholder value. It can also prevent you from taking advantage of opportunities that drive innovation and growth The more you understand the risk exposures within your business, the more you can make informed decisions to prepare for the risk and promote the right opportunities Risk Culture With Communication: C-Shift provides the structure for dealing with risks systematically and successfully Prepare your company to understand the need for a risk culture from the “top down” so risk can be communicated and understood. This will minimize the negative effects of risk on your capital and earning, and encourage profitable growth
    16. 16. INTERNAL USE ONLY Embed a proactive corporate risk culture Build a Risk Culture prior to implementing a Risk Framework 1.Communication: Make a Commitment to Stakeholders about an “Open Environment” on risk culture and management. This includes employees, shareholders, partners, customers. 2.Leadership: Positive Messaging “Tone from the Top” and ownership of ERM from top to bottom of the firm 3.Growth: ERM into Action by linking the organization Risk Framework to Profit, to drive accountability 4.Sustainability: Focus on Implementing to align with long term Corporate Goals Source: Survey by Harvard Business Review Analytic Services in conjunction with Zurich Financial Services Group (Zurich) January 17, 2012
    17. 17. INTERNAL USE ONLY C-Shift: cultural shift to risk accountability
    18. 18. INTERNAL USE ONLY Align Key Performance and Key Risk Indicators to business manage risk • Key Performance Indicators (KPIs) help a firm see how it is performing in relation to its strategic goals and objectives. • Key Risk Indicators (KRIs) are leading indicators of risk to business performance, giving an early warning to identify a potential risk event. • Zurich uses KRIs to monitor risks are in the areas such as: • natural catastrophe risks (percentage of group shareholder equity) • asset-liability matching (duration mismatch) • strategic asset allocation (percent allowed in investment categories) • credit risk (weighted average credit rating) • other risks specific to business or functional areas
    19. 19. INTERNAL USE ONLY Enterprise Risk Wheel
    20. 20. INTERNAL USE ONLY Leadership in Risk: bridging the gap Engage with leadership by using ERM to go beyond compliance by applying ERM tools for operational and strategic purposes • mergers and acquisitions • business resiliency • new project and product development • customers’ risks • decisions made in the marketplace • other
    21. 21. INTERNAL USE ONLY Zurich’s family of risk tools Risk understanding Total Risk Profiling RiskRoom Natural Catastrophe -Location risk Profit risk exposure Disruption understanding Business interruption analysis Risk assessment Provides macro country insights, e.g. political stability, economic status, labour situation Provides exposure information for Zurich, customer or supplier locations in respect of e.g. floods, earthquakes, windstorm, related transport infrastructure Helps in the understanding of the level and nature of disruptions in a particular industry or a particular location from our proprietary database Enables a company to understand its total customer or supply chain profit exposure in terms of a particular location, country or region Helps a company model its relevant BI exposures Formalised assessment of relevant areas which are part of the due diligence process in sourcing Structured approach to defining risk appetite and prioritisation for dealing with risks in the value chain Visit www.zurich.com/riskroom and www.SupplyChainRiskInsights.com for more info, and search for our free app of the Zurich Risk Room in the iTunes or Google Play store
    22. 22. INTERNAL USE ONLY Total Risk Profiling (TRP) Define the risk appetite Prioritize risk scenarios and develop improvement plan A B C D E F IV III II I PROBABILITY SEVERITY 36 42 51 Prioritized Develop risk scenarios Quantify financial severity and assess probability TIMELINE!! 1. VULNERABILITY • w hat ? • w here • controls? 2. TRIGGER • how ? • w hy? • w hen? 3. CO NSEQ UENCES • how big? • how bad? • how much? TIMELINE!! 1. VULNERABILITY • w hat ? • w here • controls? 2. TRIGGER • how ? • w hy? • w hen? 3. CO NSEQ UENCES • how big? • how bad? • how much? How can you deal with risks that you don’t even know are there? Visit www.ZurichERM.com for more information
    23. 23. INTERNAL USE ONLY Proactive in the business life cycle Zurich-sponsored HBR Survey: “Risk Management in a Time of Global Uncertainty Yo u kno w whe n yo u’re re ally g e tting g o o d at risk m anag e m e nt, whe n the co m pany do e s its risk asse ssm e nt at the pro je ct kicko ff rathe r than at the e nd. – Angela Herrin, Harvard Business Review Analytics Services
    24. 24. INTERNAL USE ONLY Turning risk into results After Zurich introduced an enhanced operational risk management framework • One business unit reduced operational risk-based capital (RBC) consumption by 21.7 percent when Zurich moved from an asset-based to a risk- based approach for operational risk quantification • The business unit then identified high risk exposures, performed a deeper assessment and developed mitigation measures. • The unit experienced an additional reduction of 28.9 percent in operational risk capital consumption the following year. • Operational risk capital not consumed was then available to fund profitable growth for Zurich.
    25. 25. INTERNAL USE ONLY Customers Shareholders Regulator Ratings View of future earnings and sustainability is impacted by perception of risk and its management. SHV  Rating Agencies are now looking at ERM. Risk management therefore impacting the cost of funding capital. Rating  Cost of Capital  Want well managed insurers who can manage the risks that they face.  Customer Value Capital regimes mean that risk management is having an impact on the level of capital required.  Reputation  Regulatory Capital Management Employees Agents & Brokers Enterprise risk leadership benefits all stakeholders
    26. 26. Risk Oversight • Item 407(h) also requires companies to describe the role of the board of directors in the oversight of risk. Recently, the U.S. Government Accountability Office found that economic output losses from the 2007- 2009 financial crisis could exceed $13 trillion. Given the magnitude of that crisis, which continues to be felt, it would be difficult to overemphasize the importance that investors place on questions of risk management. – Luis A Aguilar, SEC, Feb 20, 2013
    27. 27. What the prof saw… • “We’re just going to do compliance ERM.” • CFO • “I’ve never heard any of that.” – NYSE Board member • “Can’t criticize anything we do.” – NYSE Chairman of the board • “We cleanse it before it gets to the board.” – Fortune 100 • “Organization’s top risk is culture and communication.”
    28. 28. Board complaints • Not getting strategy/risk info timely; no real time to digest/question. • Says ERM but looks like silos. • ERM leader does not think broadly enough. • We do not assess board effectiveness in risk, strategic risks, or risk oversight! • Good information…
    29. 29. Getting good information –“CEOs can share only what they want to share.” –“The question for most boards members [is this]: Are they getting good information? And I would argue that, in some cases, they are not.”
    30. 30. Improve transparency • “When you have a good CEO who is open and transparent, you are able to get good [risk] information. When you don’t, it’s the board’s responsibility to create an environment where they get the information they need… and not be passive or be managed.” – Board member
    31. 31. Boards • Get engaged • Do more than listen • Understand the risk culture • Ask the right risk questions
    32. 32. Leading Risk Culture Change Webinar Johan Willaert Board member FERMA 15 May 2013
    33. 33. agenda • Risk governance and risk committee • Risk appetite and risk tolerance • Strategic and operational goals versus risk management • Channels of communication: link with – Internal audit – business units
    34. 34. Risk governance and risk committee: • How to organize and • How to make this organisation work and make it ‘focus driven’  with focus on operational and strategic goals
    35. 35. MGD11.5.10© Vlerick Leuven Gent Management School Corporate Strategy Management Culture Management Architecture Corporate Governance Risk Management:Risk Management: IntegratedIntegrated ApproachApproach Internal risks: Internal control Financial risks Infrastructure risks Compliance Intellectual property ….. External Risks: Economic environment Environmental hazards Reputational risks Marketplace risks ….
    36. 36. Risk appetite and risk tolerance: • to be prepared at C-suite level and • approved and monitored at board level
    37. 37. Strategic and operational goals versus risk management (1): • Link risk management and better performance (see FERMA benchmarking survey 2012)
    38. 38. Strategic and operational goals versus risk management (2): • Importance of & risk culture risk awareness
    39. 39. Channels of communication: link with • internal audit: (3 lines of defence) • business units (top-down and bottom-up)
    40. 40. MGD11.5.10© Vlerick Leuven Gent Management School Audit Committee CEO + Executive Committee The Board Business support groups: Business unit operations: Group risk oversight & compliance group risk profile Individual managers Operationalrisk managementERM Different management levels have to communicate (top-down & bottom-up) tactical level operational level strategic
    41. 41. Questions? OCTOBER 17, 2012 To ask a question … click on the “question icon” in the lower-right corner of your screen.
    42. 42. Thank you for joining us! MAY 15, 2013
    43. 43. INTERNAL USE ONLY Copyright 2013 The information in this presentation was compiled from sources believed to be reliable for informational purposes only. All sample policies and procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all information contained herein is not intended to constitute legal advice and accordingly, you should consult with your own attorneys when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances The subject matter of this presentation is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy. Zurich Insurance Group 44

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