Liability risk: Adapting to survive

The most obvious impact for organisations from all industry sectors so far during the pandemic has been the need to move towards a more virtual environment, with investment in digitisation and a shift towards remote working. Beyond these changes, and the significant impact it has had on employees and the workplace, businesses have adapted in other ways - both to survive the challenging climate as well as to support government initiatives. 

Take the Accor hotel group. In response to the trend towards remote working it is gradually integrating modular workspaces throughout its hotels, which include brands such as Raffles, Banyan Free and Fairmont. In Bangkok, ten hotels have begun providing daily co-working spaces and in Singapore, the famous Raffles hotel is opening its suites to guests from 7am to 7pm as part of a new - more luxurious - “Work from Home” initiative.

Within the manufacturing sector, many adapted facilities and machinery to manufacture new products to support the community, eg distillers producing hand sanitizers and clothing manufacturers producing personal protective equipment. Food and beverage organisations have seized the opportunity to produce more canned and frozen goods, building slack into their supply chains and expanding warehouse storage facilities where necessary.

Being offensive and defensive

Industry sectors have been impacted in different ways, points out Parima chairman Franck Baron, who is also group general manager, Risk Management & Insurance for International SOS. While industries such as aviation and hospitality have struggled, e-commerce and entertainment organisations have thrived in many cases. But none have been immune to the impacts of COVID-19.

He thinks there will be plenty of testing times to come, given the volatility of the situation and the potential for credit risk issues. Regardless of sector, companies that can remain agile and adapt quickly are likely to be the ones that will fair best.

“The challenge for all organisations is the ability to project and to anticipate what lies ahead,” says Baron. “International SOS partnered with a luxury hotel group in the US to transform hotels into testing and vaccination centres, even medical treatment centres in some instances. It’s the kind of move that can enhance reputations for organisations and their brands.”

Risk managers must help identify opportunities and facilitate these decisions so senior management can move quickly, he thinks. “There is a pressing need for the risk manager to help the organisation to prioritise. The last thing you want is to be so focused on dealing with all risks that you miss an opportunity.”

Consultancies continue to advise that organisations seize whatever opportunities they can to ‘survive and thrive’ in the face of adversity. In its 3R framework (Re-imagine, Re-plan and Re-create), KPMG anticipates supply chains will become more agile and that companies will capitalise on emerging sectors for growth.

“All this comes with a wave of new unleashed innovation, agility and risk-taking of entrepreneurs, exploring and pivoting into new areas,” note Ong Pang Thye, managing partner and Dr Yap Kwong Weng, Principal Advisor at KPMG in Singapore. “This is an opportunity for Singapore entrepreneurs to create the next Singapore brand in critical sectors, such as pharmaceutical, technology and food.”

“This is the time for companies to make structural changes in their business models because the world has fundamentally changed and there is no turning back,” they add.

Liability insurance implications

Insurers are working closely with brokers and intermediaries to ensure coverage is fit for purpose as organisations adjust their business and operating models, so they can understand how these changes affect the company’s overall risk profile.

“In Singapore, some venues have been converted to temporary accommodation to house migrant workers, for example,” explains Daphne Boon, senior vice president, General Casualty and SME Divisions, Asia Pacific, Allied World Insurance. “It’s a very drastic change in their nature of business and for many of them, it is their first time dealing with these challenges, in the face of such an unprecedented event.”

“As another example, hotels are being used as isolation or quarantine facilities, which is a shift from housing guests to housing visitors under strict quarantine measures.”

“On the clients’ side, they have to quickly piece together the requirements from the government while making sure all the safety measures are undertaken from a risk management standpoint. Then from an insurance perspective, all parties have to understand whether and how their coverage will continue to provide them with the kind of liability cover they require.”

How insurance policies respond when a loss occurs might not be front and centre of mind when organisations are in crisis management mode. Therefore the role of the broker is important. Their regular touch points with clients puts them in a position to understand how businesses are adapting their operations and what insurance implications this might have, explains Boon.

“Even before the COVID-19 pandemic struck, we were seeing clients place an increasing level of importance on the tripartite relationship between broker, client and insurer,” she says. “Back in 2019, for the first time in many years, the region started to see a tremendous amount of pressure on both the availability of cover and pricing. If you then add the COVID-19 pandemic into the mix, it’s become even more critical for all parties to be focused on building a strategic relationship that is based on a deep understanding of the client’s philosophy to risk transfer.”

“In the general liability space, the more as an insurer we understand a client’s risk – from the risk management practices to the detailed claims history – the more we can work together to develop the best solutions and recommendations,” she continues.

“Over the last 12 months, it’s been impressive to see how many corporate risk managers have taken a strategic and proactive approach to their insurance relationships. We’ve had even more clients reach out to us to better understand their coverage, to stress test it against different scenarios and whether in actual fact, their policy would respond in the way their C-suite might be expecting it to. The sophistication of clients is definitely increasing in this regard,” says Boon.

In a virtual roundtable discussion in April, StrategicRISK, in partnership with Allied World, will explore some of the liability considerations that have arisen during a time of great change. Some of the key themes discussed will be explored in the next three articles of this series.