Over the past few days, I attended Airmic 2013, an event where over 800 UK industry buyers and sellers in the insurance market meet to discuss some of the latest trends, find out about current issues affecting the market, and listen to some high-profile keynote speakers.
I have to say that from a personal standpoint, I thought that some of the content discussed could have been beyond me in terms of industry knowledge required. However, in reality, I found the content discussed engaging and relevant to all business. For example – one idea discussed was the notion of building effective risk management to all organisations in today’s competitive and globalised business environment.
Currently in the media, we are hearing more and more about businesses around the world suffering from devastating natural catastrophes, or losses through accidents that could have been avoided. For instance, the recent industrial accident in Bangladesh caused the death of over 1,100 people and has left a trail of shattered lives.
The harsh reality though, is that this tragedy could have been avoided if proper building regulations were adhered to. Sam Mahers from Labour Behind the Label, a campaign pushing for retailers to sign up to the Bangladesh Fire and Building Safety Agreement, said that it was common for illegal floors to be added to buildings and described the event as shocking but, “in no way surprising.”
In light of incidents such as this, I believe that many organisations should sit up and take notice of some of the issues discussed at Airmic. Below are two that really stuck in my mind.
Risk management should become a part of corporate strategy
In today’s modern world, companies have a responsibility to ensure that risk management is engrained within their business strategy primarily for the safety of their customers and employees but secondarily, so that they are able to build a degree of resilience in today’s über competitive environment.
If a company suffers a loss today, it can lose profit, market share, and severely damage its reputation within a matter of weeks. Therefore, in order to survive and become a market leader in any industry, risk management must become a key component of corporate strategy.
Too many CEOs are forced into taking the short-term view with regards to profitability and growth, and have become too preoccupied with satisfying shareholders and members of the board. In doing this, they ignore organic, sustainable growth (where risk management is a key driver).
Supply chain
Over the past 15-20 years, supply chains have changed dramatically: they are no longer linear but complex, interconnected webs with critical nodes. All organisations have to ensure that both they and their suppliers are as responsible as possible in ensuring they are able to operate 24 hours a day, 365 days per year. Supply chain disruption has become a huge problem because suppliers are often based in emerging markets, in high risk areas, that are often prone to flooding, windstorm, tsunamis or earthquakes. As competition across industries has increased, organisations have been forced to continuously drive down costs by using suppliers based in more obscure, higher risk areas.
To combat the supply chain issue, one step businesses can take is to audit all their supplier relationships and build a network of preferred and alternate suppliers with contrasting and complimentary risk profiles.
Following the economic downturn of 2007, I believe that companies (of any size) have a duty to operate responsibly by embedding a 360 degree approach to risk management and supply chain management into their strategy. The reality is that the business environment is changing fast, and companies must ensure that they evolve accordingly to ensure that they are not vulnerable to losses. Collectively, we have to ensure that the devastating events in Bangladesh never happen again.
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