Airmic Conference 2014
Roads to Resilience
Wednesday 18th June 2014
Arnout Van der Veer
Airmic
Martin Caddick
PwC
Neil Allcroft
Crawford and Company
Ian Canham
Lockton
Agenda
 Introduction to Roads to Resilience, Arnout Van Der Veer, Airmic Board
 Resilience – Board, Culture and Management Views, Martin Caddick, PwC
 Practical Progress, Neil Allcroft, Crawford & Company
 Insurance considerations, Ian Canham, Lockton
 Open Discussion
Roads to Resilience
Case study research into what does ‘good’ look like
- Cranfield Business School 2013
In depth case studies of;
AIG
Drax Power
IHG
JLR
Reviewing




People and culture
Business Structure
Strategy, tactics and operations
Leadership and governance
ODA
TTP
Virgin Atlantic
Zurich Insurance
Preparing for Roads to Resilience
Conclusions of Roads to Ruin -
 Catastrophic failures of risk management appear to take everyone by
surprise…
 …and yet with the benefit of hindsight the underlying causes of these
failures appear obvious
 Can we apply the lessons of hindsight to planning for the future?!
Roads to Ruin:
Seven key points of failure
 Board experience, skill and lack of NED control
 Board risk blindness
 Inadequate leadership on ethos and culture
 Defective internal communication
 Organisational complexity
 Risks from remuneration structures
 Risk Glass Ceiling
Roads to Resilience
Identified Key Questions and Enablers
Questions
Enablers:
1. How do resilient organisations
oversee and manage their risk
management strategy?
2. What are the enablers, drivers and
risk management practices in place?
3. How do they measure the results and
impact of risk management activities?
4. What are their governance (and
empowerment) controls and
strategies?
5. What are the critical leadership and
business structure issues?
a. People and culture
b. Business structure
c. Strategy, tactics and operations
d. Leadership and governance
Roads to Resilience
Outcomes: 5 Resulting Principles
1. Resilient companies have exceptional risk radar to detect changes in the
external and internal situation
2. Resilient companies have diversified resources and assets to facilitate
alternative approaches
3. Resilient companies build strong relationships and networks, both
internally and externally
4. Resilient companies have the ability to respond rapidly and decisively to
an emerging crisis
5. Resilient companies review and adapt based on experience and changing
circumstances
Components of Principles and Business Enablers
Principles:
Business Enablers:
Roads to Resilience: Model for Resilience
PwC – Board, Culture and Management Views
Some reflections….
 The traditional ‘protective disciplines’
are not enough. You can do these well
and still fail.
 It is not going to get easier – increasing
speed and complexity makes risk less
predictable.
 Cannot be done in silos - resilience
requires leadership from the top.
Who We
Are
What We
Know
What We
Do
How We
Do It
Hot Topic?
Academia :
Harvard, NYU
Cranfield,
Leeds, Glasgow,
Warwick
PwC
Barriers and challenges
The fog of resilience
You need to:
 be able to measure key factors
Protectionism
Preconceptions
Lack of
appetite
Conflicting
definitions
 discuss, debate, make intelligent
decisions based on key factors
Resilience
Limited
horizon
(time)
False
assurance
Lack of a
delivery
plan – too
conceptual
Limited/no
consensus
 use what you have, but cut across
silos
Crawford – Practical Progress
 New Risks into ERM Process
Classic frequency/severity matrix
Need a monetary value to inform risk appetite for emerging non physical risks
When does solvency, interest cover, credit rating, dividend cover become stressed?
What is the $£ value of risk appetite per risk and in the aggregate
 Real problems assessing these values in respect of;
Cyber
Reputation
Regulation
 Lack of historic reference points to provide guidance and benchmarking.
Practical Progress
 Scenario Planning
More organisations/corporates are doing pre planning workshops within
their businesses, driven by ERM compliance. This helps to engage and
inform the risk management function more widely with operations
Engages with profit drivers e.g. Markets, Supply Chain, Unique Delivery and
sources of competitive advantage
Drives out the key $£ risks and forces quantification and prioritisation
Currently this is episodic in many companies, rather than an embedded and
living process
What should risk managers and insurers be thinking and doing?
Lockton - Insurance Considerations
Insurance and the Road Series of Reports
 The majority of Airmic members are insurance buyers
 Roads to Ruin found that insurance makes no difference in protecting
companies in times of ruin
 Roads to Resilience did not identify insurance purchasing as a required
enabler to a resilient company
Is this fair and if so, can we make insurance more relevant?
Insurance Considerations
Do insurers take these findings into account?
 Long term robustness and the identification of required principles and
enablers provide longer term underwriting data, rather than short term
lagging indicators such as claims.
Insurance Considerations
Do buyers take these findings into account?
 Short term buying patterns and market behaviours inhibit insurers ability to meet
the real risks facing the Insured
Insurance Considerations
Does the report appeal to an insurer’s/client’s beliefs but clashes with their
actions?
 Is there a fundamental mismatch between long term companies resilient
needs and insurance market behaviours, which means insurance will always be
a tactical not strategic purchase?
 Can insurers differentiate risks from both a pricing and coverage perspective
on long term resilience findings versus short term indicators?
 Will clients take a longer term view of pricing even if it moves against market
trends?
 What risks are insurers willing to accept to create true risk partnership with
their clients to ensure insurers get a fair share of the risk financing spend?
Insurance Considerations
Or are brokers to blame?
Final Observations
 Effective risk management is NOT just about compliance
 Risk is at the heart of strategy and effective risk management should be an
enabler and a potential differentiator
 Growth in a flat market can only be achieved by taking risks – these must be
calculated and transparent
 Reputation is critical and reputation risk management should be prioritised
 The tone is set at the top
 The information required to take risk aware decisions is most likely to exist
already inside the company
Route to Resilience?
 How can resilience be achieved?
How can current levels of resilience be measured?
Is wide organisational change required, or does resilience fit with your
current agenda?
How do you ensure the Board receive the correct messages?
What barriers to resilience are anticipated?
What would assist you in making your organisation more resilient?