Asia’s risk professionals can lead their companies’ emerging strategies by embracing social and sustainability issues
Paul Clarke is a well-known figure in Singapore’s risk and insurance world.
But the former JLT and Marsh man is now in slightly unfamiliar waters as the managing partner of the newly established strategic consulting firm, GreenOcean Group.
The group’s stated aim is to assist companies to achieve profitable growth through addressing important social and sustainability issues. And, as Clarke explains, this was a logical new focus for someone involved in crisis management for so many years.
“From the work I was doing for clients across Asia, I could really see that the firms that understood how to operate well in terms of crisis management objectives had an inherent understanding that the firm can be a force for doing good,” Clarke says.
“Particular clients in Hong Kong and the Philippines knew how to respond to a crisis because they inherently understood what the issues and needs of their stakeholders were; they just knew it, they didn’t need me to tell them.”
Clarke believes that a strong corporate social responsibility (CSR) programme can be a powerful tool to manage reputation risk.
“When you don’t meet or address the needs of all of your stakeholders, it can lead to a loss of trust and a crisis for the company,” he says.
Corporations need to operate within their communities with a strong awareness of staff, suppliers and regulators, not only customers and shareholders, says Clarke.
“When business does this well, it can create incredible change,” he says.
“It can offer real scalable solutions to some of the problems of the world, whether it be social or environmental issues – and it can do this much better than government agencies acting alone with limited budgets.”
In Clarke’s opinion, corporate risk professionals in Asia can take the lead when it comes to the management of CSR and sustainability issues. In doing so, he says, they can put themselves at the forefront of their company’s emerging strategies in an area that is being driven by consumer expectations and increasing regulatory pressures.
“Risk managers have a deep understanding of how companies must operate, and so are well positioned to develop realistic solutions to problems,” Clarke says.
“And risk managers in Asia quite often have a unique role to cut right across the value chain of the firm to see how each risk should be understood and managed across different silos.
“In other words, how a firm fits within its industry, within its relationship with regulators, suppliers and so forth. Through that, risk managers can be very effective agents for change within their companies.”
The problem as Clarke sees it is that Asia-based risk managers often don’t see their role as being related to CSR or sustainability, despite the fact that this area is strongly connected to social, reputational and supply-chain risks. CSR is traditionally seen as a cost centre, “something that companies sometimes have to do; a compliance thing”, he adds.
“We want to convince them that it’s something they should want to do, that just makes good business sense, to create what we call ‘shared value’,” Clarke says.
Clarke explains that the concept of shared value was first introduced in a 2011 Harvard Business Review article, which detailed how companies could innovate to meet society’s needs (social value) while building a profitable enterprise (business value).
“A shared value business strategy is doing well for the company, by doing good by addressing a social issue,” he says.
“We want firms to see CSR issues as sources of profitable business opportunity.”
Clarke says that that this process can be likened to “what risk managers have tried to achieve in terms of enterprise risk management (ERM)”.
“That is, to create opportunities that increase their company’s value-creation, through a proactive risk management perspective,” he says.
ERM is about moving firm’s risk management from “something that’s very compliance driven to something that’s more broad based, looking at the horizon”, Clarke says.
“Progressive, forward-thinking risk managers see that, and are agents of change within their own companies as they move risk from something that’s pure compliance to something that’s a source of business opportunity,” he adds.
For example, Clarke says that supply chain risk management can be integrated with a firm’s sustainability strategy.
“By looking to develop or offer supply chain solutions based on sustainable environmental strategies, firms can lock in what are becoming increasingly tight supply-side resources consistent with relevant global standards,” he explains.
Furthermore, he says, more consumers want to know that firms are keeping an eye on the supply chain, and that suppliers are operating to acceptable standards.
“Big companies are becoming aware that they need to be applying good governance because ultimately it’s something that consumers just expect and they will reward those firms operating to best practice in each area,” he says.