More than 1200 participants assembled Monday morning at Geneva’s International Conference Center for the fifth Forum of the Federation of European Risk Management Associations (FERMA). Delegates were welcomed by Pierre-François Unger, president of the State Council of the State of Geneva.
In her opening remarks President Marie-Gemma Dequae described some of the new, and not so new, challenges facing Europe’s risk managers – regulations, climate change and its effects, as well as the increasingly complex nature of global business. “Enterprise risk management [ERM] is playing a more important role in setting priorities and giving guidance to operational risk management,” she said.
FERMA, like the European Union, has grown. From the original six members who attended the first forum in Berlin in 1999, it now has 15 members, as Bulgaria’s BRIMA, Poland’s POLRISK and Finland’s FinnRma, joined this year. Slovakia and Turkey are waiting in the wings.
One of the organizations more immediate priorities is to draft a response to the recent European Commission report on business insurance practices within the 25 member EU members (See IJ web site Sept. 26). It raises questions of unfair competition in two areas: 1) premium “alignment” in reinsurance and “coinsurance;” and 2) the lack of transparency in broker carrier remuneration. The EC also questioned whether the insurance industry’s exemption from otherwise applicable regulatory requirements, which it has had since 2003, should be continued. It is scheduled to expire in 2010.
Both Dequae and Forum Chairman Franck Baron discussed the issue at length in a press conference, following the day’s sessions. In many ways FERMA’s actions are similar to RIMS in the U.S. EC committees frequently ask the organization for its views on matters of public interest, which, Dequae said, “has brought politics in Brussels to a different level. The EC is used to having us inform them of what to expect from companies and brokers on matters that concern them.”
If you wanted an example of how risk management should not be conducted, international business consultant and engineer Stephen Carver laid out a chilling presentation of the NASA’s failures to heed obvious warnings that led directly to the destruction of the space shuttles Challenger and Columbia. From his extensive analysis of the disasters, both could have been prevented, if political and economic considerations had not been given priority over sound risk management. In both cases, once warnings were ignored the chance of catastrophic system failure was 100 percent.
Such a presentation leads inevitably to discussion of the increasingly complex types of risk large global organizations face every day. Gary Steel, the head of Human Resources for ABB, the international construction and engineering firm, stressed the overall nature of those risks. ABB operates all over the world with 140,000 employees, making his job a difficult one. He noted that political, security, health and safety, social, ethical and human rights concerns, all must be considered in constructing a risk management strategy to deal with them.
In the afternoon the Forum broke up into a series of workshops. One of the more interesting presentations, moderated by Maurizio Micale, Corporate Risk and Management Director of Switzerland’s ST Microelectronics, focused on how the insurance industry’s “traditional model” has become outdated and is so abstruse that its ability to compete is being jeopardized. Micale described the procedures ST had taken to acquire coverage, but on a simplified, and far more efficient basis.
James Nicholson, Willis managing Director, subbing for the FSA’s Anna Sweeney, observed that some of the complications arise from the differing rules and regulations in different countries. But he also agreed that “anyone from a non-insurance background finds the industry way too complicated. It doesn’t respond to our client’s needs. We spend more time explaining [to clients] how it works than we do listening to their needs.” He pointedly mentioned one Willis client, who, after listening to a lengthy explanation of why things had to be done a certain way, called the whole process “a load of rubbish.”
Zurich’s Geoff Riddell, CEO of Global Corporate, didn’t disagree, describing the industry’s “massive distribution costs” as totally inefficient. Competition is already taking advantage of those inefficiences, as company risk managers seek better and more responsive solutions to their needs. More standardization, more innovation, more cooperation, more transparency, and above all more leadership in seeking solutions all offer hope, but implementing them will prove difficult.
“The danger is complacency,” said Nicholson. “The industry is becoming less and less relevant, as the lines between brokers, insurers and banks become more and more blurred. What we [the industry] need to do is to get ahead of the changes, rather than just react to them.”
Over the next two days FERMA participants will be addressing that, as well as other risk management problems in the complex world.
Source: FERMA Forum – www.ferma.eu
Topics Legislation Europe Training Development Risk Management
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