Taiwan’s Pan-Asia Risk and Insurance Management Association (PARIMA) board member Danny Lin talks exclusively to StrategicRISK in the lead up to PARIMA’s Asian Risk Management Conference, which is being held in Singapore next month

Danny Lin is in charge of risk management and internal audit at Qisda, the mother company of electronics firms BenQ and AUO.

Headquartered in Taiwan, the group has assets of around $200 billion and more than 100,000 employees, and it operates facilities in China, Mexico and Taiwan that produce electronic products for consumer, commercial, medical and industrial applications.

It is an original design and equipment manufacturer of everything from digital signage, projectors and scanners, to smartphones, e-readers and medical imaging equipment.

However, Lin says, “in this region, the main role we play is manufacturing, not branding”.

“For example, with iPhone 5, Apple might take over 50% of the profit, but in Taiwan even though we manufacture all the components, we take less than 1% profit in return,” he explains.

“We have to take the risk but the return is very limited. This is a big risk for the Taiwanese electronics industry.”

All that adds up to a serious concentration of risk, Lin says, due mainly to high levels of capital investment.

“Each fabrication [plant] costs more than US$3 billion, so we seriously take care of hazardous risk for the plant itself: fire, chemical, explosions and nat cat,” he says.

“We also have to handle the financial risk – heavy depreciation, interest rates, currency risk – as well as complicated supply chain disruption risk.”

A Taiwan first

This is why Qisda (formerly BenQ) became the first company in Taiwan to establish a risk management committee in 2005, Lin says.

“One of the senior managers was aware of the importance of ERM and wanted to establish a risk management system, so he hired me and I started to build up these kind of infrastructures and created a risk management team,” he says.

“Then I called up senior management to see what main risks we might face for the coming year, and also provide a risk improvement action plan.

“Every year we identify the corporation’s top three risks and each risk committee member has three risk improvement projects, so we have about 30 projects to monitor.

“That’s a fundamental of risk management: to do something to improve ourselves continuously, so our risk quality will improve.”

This philosophy is central to Lin’s outlook on risk management, but not one that is found in too many Taiwanese firms, he says.

“I think that, except for a few companies, most Taiwanese companies have a lack of commitment to risk management,” he says.

“But our government requires publicly listed companies to disclose the ERM factors and training for boards.

“Board members should take 12 hours of training in first year then three hours annually, and they have to disclose the training records in annual reports. This is required by law.”

Industry development

Indeed, Lin is keen to promote risk management at every opportunity.

This is why he’s chairperson of the Science Based Industrial Park branch of the Risk Management Society Taiwan (RMST) and a board member of the Pan Asia Risk and Insurance Management Association (PARIMA).

Lin has seen Taiwan’s risk landscape from a variety of perspectives, having worked for three years an adjuster at Fubon Insurance, three years with Aon, and now 12 years in the electronics manufacturing industry.

He says that the development of China is a large and growing risk that he has been monitoring for years.

“If China grows very rapidly, all companies will encounter issues such as raw material price rises, wage rises and labour shortages,” he says.

“When it grows slowly, we face overcapacity issues in the steel and solar industries.

“These momentums are controlled by the Chinese government, so we have to closely watch their policies.”

Lin points out that natural catastrophes affect Taiwan on a regular basis.

“The cat issue is quite severe in Taiwan because it is in an earthquake zone and we have typhoons every year, so the people in Taiwan deal with this kind of risk very well, but I think we underestimate the impact and the frequency,” he says.

Talent acquisition and retention is another pressing risk area in Taiwan, as in many Asian countries, Lin adds.

“I think Taiwan has a problem with low average salary,” he says.

“When I started my work 20 years ago, an entrant’s salary was quite similar to today. So for the past 20 years, Hong Kong and Singapore salaries might have grown two or three times, but Taiwan has stayed the same as 10-20 years ago.

“We face a situation where young graduates choose their first job in China because the basic salary is much higher, and the skilled people move to Hong Kong or Singapore for double or triple the pay.”

Lin says he sees his mission at Qisda as creating a platform for BenQ and AUO team members to discuss risk management and share information.

“We can do a lot of things to help others and take care of all the stakeholders,” he says.

“I always consider that risk management is my career; I would not leave this field.

“My boss told me, Danny, before you retire you have to do two things: first is write a book to continue all the valuable experience and knowledge, to help people prepare for and prevent events.

“The second one is to prepare material to become a lecturer and speak to people to plant the seeds of risk management – and I agree with him!”

Click here for further information about PARIMA’s Asia Risk Management Conference, 8 - 9 December 2014, Singapore