Risk appetite and risk maturity are two confronting issues that need to be assessed by companies, agreed upon and communicated throughout the business.
Global risks are converging so quickly that while individual countries throughout Asia still face unique challenges, cyber fraud, credit risk exposures and large scale data breaches are universally affecting countries as a whole.
“It changes so quickly that every three to four months there are new global strategic risks popping up,” Brad Tymmons, enterprise risk & insurance manager, EnergyAustralia and president RIMS Australasia, says.
“The external environment changes rapidly so it is important to identify the leading risk indicators and analyse the range of financial risks of the company based on these external environment changes.”
Exchange rate and interest rate movement, cyber-security threats, changing micro and macro economic conditions such as household consumption, government regulation such as tax reform, and supply chain demands fluctuating are just some of the challenges facing individual companies and countries, along with multi-national companies, offering their products and services around the globe.
Tymmons, who has a wealth of experience in the insurance industry, having previously worked with Willis and AON, believes it is essential for companies to agree on a cohesive risk strategy and communicate that from the top down.
“The board and executive should have a clear understanding and agreement on the risk appetite and risk maturity of the company,” he says. “The risk management profession need to support this understanding and agreement, and then make sure it is clearly articulated down throughout the company.
“It is also important to promote where effective risk management has resulted in the achievement of objectives across projects or business operations. The risk industry is not known for self-promotion but effective risk management creates an environment for the achievement of objectives.”
While risk profiles differ from country to country, the impact on a disaster in one nation can have an economic and political impact upon another.
“The world continues to globalise and become one, therefore risks are converging,” Tymmons says.
“In the region we have witnessed a catastrophic weather event in Thailand materially impact Australia’s industry. Similar to Asian cities, Australia has recently experienced increased levels of terrorism and political violence. Pandemics have spread rapidly and we witnessed this with SARS and more recently Ebola.
“Cyber risk too can hit anywhere and anytime from any place in the world so as you can see there is a lot of converging and correlated risks throughout Asia and Australia.
“So, while individual country risk profiles are different across Asia, there is also some synergy when it comes to global problems.”
Tymmons has been active in the establishment of The Risk and Insurance Management Society (RIMS) across Australasia. RIMS is a not-for-profit organisation dedicated to advancing the practice of risk management.
“The three key benefits of RIMS membership are: learning, networking and resources so our activities are strategically coordinated to deliver these benefits,” he says.
“We commenced our roundtables in late 2014 and they were highly successful. We are continuing these as part of our RIMS Australasia Risk Roundtable Series in 2015.”