Regulation, reputation and resilience dominate risk roundtable agenda

Malaysia’s top risk professionals joined the StrategicRISK team, academics and Zurich’s regional representatives yesterday to discuss the risk landscape in the country and the Asia Pacific region.

Held at the Hotel Equatorial Melaka alongside the Malaysian Association of Risk and Insurance Management (MARIM) conference Securing the Future through Risk and Resilience Management, the roundtable featured lively and wide-ranging discussion on a variety of pressing issues.

Regulation concerns

When asked to nominate the primary risks faced by organisations operating in Malaysia, many participants highlighted regulatory pressures.

Seen as both a risk and an opportunity for risk managers, regulation was referred to as a “double-edged sword”. On one hand, regulatory compliance issues often prompted better board engagement, which risk managers could use to implement far-reaching initiatives.

On the other hand, the timing of regulatory changes often took firms off guard – individual line managers could be resistant to change, causing headaches for risk managers.

An interesting discussion on the political climate in Malaysia focused on transparency and corporate governance issues, which many said had markedly improved in the past five years.

Merging of global values

Fraud risk and political intervention, especially for government-linked companies, were identified as challenges to be overcome.

This developed into a discussion on the merging of what was referred to as the “Asian value system” (described as values developed through culture, religion and other social influences) and Western business practices.

It was thought that this might give companies in the region a competitive edge in the long term.

Innovation and reputation

Failure to innovate was next on the risk list. One issue that clearly resonated was the question of whether innovation was supported by regulators and insurers, particularly at the financing stage.

This dovetailed into a discussion on how companies needed to, above all else, “stay relevant”.

Talk inevitably turned to reputation and how it can be priced and quantified. Reputation risk was flagged as a major challenge to boards, risk managers, brokers and insurers alike.

Minimising risks inherent in corporate structures, leadership styles and business practices and processes was next on the table. It was suggested that risk professionals who sat in their company’s management committee were well placed to embed a strong risk management culture in the organisation.

It was seen as particularly important that a top-down approach to risk management be encouraged in Malaysia and across Asia as a whole’

It was seen as particularly important that a top-down approach to risk management be encouraged in Malaysia and across Asia as a whole, so that effective risk management could strengthen companies on the back of a strong mandate and commitment from the board.

Reacting to risk

This led to an examination of the state of risk management in the region, with many participants lamenting that in many firms, risk management was purely about crisis management. The aim should be to become proactive in mitigation as well as quick to respond, it was suggested.

It was agreed that effective risk management was about reducing both a risk’s probability of occurring and its impact.

Cyber risk was discussed in the context of its prominence in the World Economic Forum’s (WEF) Global Risks Report 2013.Candidates debated the threat of what the WEF calls “digital wildfires in a hyperconnected world”.

Discussion ranged from social media, to the need for senior managers and the board to be more IT savvy, and how to handle transactional data, damaging competitor actions and cloud computing.

Generating good people

People retention was discussed in a framework of generational change, which many perceived as affecting attitudes to company loyalty and career expectations, as well as education and training.

The hiring of future risk managers was also discussed, with a suggestion that hiring risk professionals from a variety of industries provided specialised knowledge that might allow more innovative risk management policies to be developed and implemented.

Risk management courses run by tertiary education institutions were seen as needing to be more relevant for graduates wanting to become risk professionals.

Use of captives

The use of captives provided an interesting talking point, despite the fact that no one present had a working captive.

Several risk managers said that they had examined the possibility of establishing a captive, but had decided against it at this point in time.

However, it was generally agreed that demand for captives would grow in the country and the Asia Pacific region, as managers chose to use them as a risk-financing tool.

Economic uncertainty was making the future more uncertain and unknown, so major investments were perceived as more risky’

Local, regional and then global economic conditions were referred to time and again. The question “Is any country safe?” was expressed in the context of the general global slowdown of growth. Economic uncertainty was making the future more uncertain and unknown, it was suggested, so major investments were perceived as more risky.

It was unanimously agreed that there would be no shortage of risk to manage in the future.

The roundtable, along with the discussions and interviews, will form the basis of StratgeicRISK’s upcoming Malaysia Risk Report, part of our Asia Risk Report series.

This will join a series of country-focused risk reports and culminate in a pan-Asia risk sentiment study to be launched at the end of 2013. Click here to visit the Asia Risk Report website