Enterprise risk management promises Singapore businesses greater understanding of risk and strategic advantages – but there’s a lack of consensus over the tangible benefits

The top brass at Singapore-based companies are beginning to embrace enterprise risk management (ERM), but it may take a while before the philosophy trickles down through organisations.

ERM brings a greater understanding of risk to a business and also offers important strategic advantages. Use of ERM is growing among companies in Singapore, although there remains a lack of consensus over the tangible benefits, as these risk professionals explain.

Dylan Bryant, regional head of IPZ Customer, Distribution & Marketing in the Asia Pacific for Zurich Insurance Group

Dylan Bryant

“There is a relationship between ERM and insurance and it comes down to a couple of things. First, transparency on how risk is priced. There is more than one factor in risk pricing and ERM will be credited somewhere if the underwriter is doing their job.

“There may also be other forces involved – for example, exposure might have changed and driven up expectations of future claims. All these things will be changing the price continually.

“Second, with transparency in place, it might be the case that if some things relating to ERM had not been done, the increase might have been far higher. You can then go back to the company and say, this is how our risk is changing, this is how the industry is performing, this what is happening to interest rates that are driving pricing on the insurance side and without these improvements we would be in a worse position.

“Within the industry, are you outperforming your peers? That is what the board really wants to know. Are you still getting a better deal than your competitors?

“In addition, the terms and conditions may have changed, which may be more beneficial. An ERM programme will achieve this, even though the actual pricing might not change. You could sacrifice those terms and conditions for a lower price – you could lower your premium to almost zero if you wanted to – but the risks you would bear as a result would be too great.”

Roland Teo, board member (chairman, conferences and events committee), Risk & Insurance Management Association of Singapore (Rimas); board member, Pan Asia & Insurance Management Association (Parima); and head of group enterprise risk management for a paper and pulp company

“There should be more recognition of what ERM can achieve. We are trying to renew our insurance programme and because we have ERM and have put a number of measures in place relating to this, management wants some sort of reduction in the premium.

“I knew that this would not be possible and I told this to the business, but the bosses and the owners still want to know why insurers are not supporting us when ERM and business continuity management has been put in place.

“In a previous role, I was with the National Business Continuity Management programme. The government funded this for five years to encourage and support ERM in Singapore.

“In light of this, I ask insurers and brokers, as we are trying to make businesses become more resilient, if they are prepared to put their money where their mouth is and reduce premiums when ERM is in place. After all, increased resilience is also in their interest. They need to recognise this to keep the company motivated and sustain what we are doing.”

Philip Ondaatje, regional director for major corporate business at JLT Specialty in Asia

Philip Ondaatje JLT

“Working with an incredibly diverse clientele, I would estimate that about 5% of companies across Asia have a true risk management strategy. Risk management to most comes down to the purchase of insurance.

“Very rarely do we get to touch base with clients who have a dedicated risk management team – it is usually treated within the finance or procurement function, and they all have different values around the treatment of risk.”

Gabriel Chew, senior manager for group risk management and insurance at Inter-Continental Oil & Fats

“Any company has to see that there is a real technical benefit to having a proper risk management structure. In the company I work for, the risk management team operates independently from finance.

“Across the company, people work in their own separate silos and what we encounter all the time is being kept out of the loop until the last minute and then suddenly having to scramble for solutions. A lot of time and resources are wasted with this approach and also a lot of opportunities are missed. ERM is the only solution to this.”

Shuh Lin Tan, head of risk management for Asia and Australasia at InterContinental Hotels Group (IHG)

Shuh Lin Tan

“ERM can cut across every department, but for many organisations it continues to be a compliance issue instead of a management tool. What they do not realise is that it can actually give them more control and, as a result, cut down on organisational costs. Changing this view is a challenge.

“At IHG, we have banded together to avoid working in silos. Our risk management, legal, corporate responsibility and internal audit teams have formed the business reputation responsibility (BRR) department, which ensures due diligence, corporate governance and assessment of risk profiles in our business.

“This is about working as a whole and not just one person who is a certified risk manager looking after everything. It is about the business understanding needs and using resources to put people into an ERM system.”

Dean Kong, senior manager of enterprise risk management at Changi Airport, Singapore

“A business needs someone at the top to say that we should not be looking at risks in silos and should have a dedicated team fully independent of other operations to look across the entire enterprise, bring people together and examine risk in the context of the enterprise. That is certainly one advantage of ERM.

“In terms of insurance, if we get the dynamics of ERM right, if we establish what the risks are and rate them, some might be hard to manage, which means that whatever controls you put in place to prevent an occurrence might not be effective and there is a high chance that it will happen. When it does, what will be the impact? This is where insurance comes in to help address the financial impact.”