Navigating Risk Management Around the Globe

Over the past few years, I’ve had the wonderful opportunity to travel the world and visit factories, distribution centers, ports, warehouses, and several offices for the company where I work. Apart from being a great way to see the world, it has also been an opportunity to learn from the ways different cultures see and manage risk.

Coming from Latin America, it was clear to me that the concept of risk management was something not highly promoted or recognized in the region. Companies that operated locally took the approach of using intermediaries to transfer their risks to insurance companies. Occasionally I would find buyers focused on managing their own risks efficiently. But that was more than a decade ago. During my most recent trips to South America, I had the opportunity to see the implementation of a regional affinity program—a collaboration between a well-known broker and our company’s financial operations. In this case, those involved were highly educated in insurance concepts and their understanding of risk acceptance was completely in line with more developed markets.

Another interesting aspect of dealing with this program was the strong relationship between the broker and our office. It was a very cordial and open communication that transcended the usually formal interaction between these parties—and included text messages flying back and forth to get the deal done. In a way, the warm personality of South Americans permeated the business environment. So when it comes to this colorful part of the world, business is, in fact, personal.

European markets have had the opportunity to evolve over centuries and this is clearly represented in the broadness of coverages available. The highly tailored wordings, both inside and outside of Lloyds, give a global insurance program more complexity when it includes exposures in Europe.

In a way, Europe continues to be an innovation hub but with difficulties in exporting those advancements. There are still great products and coverages in the insurance market that have not found their way to the Americas—and only on a limited basis to Asia. There are reasons behind this, however. While the nature of exposures in Europe continue to be unique in multiple ways, one reason these solutions have not fully taken off is that other markets do not yet fully recognize the need for them.

Asia marked, for me, a huge difference in how I saw the business relationship around insurance and the implementation of risk management. Those markets are inherently independent from the broker relationship and thus are inclined to build direct dealings with insurers. This proves to be difficult when a foreign multinational attempts to combine Asian exposures with a global program. There is reluctance to work with intermediaries and it can take time to transform the carrier-insured liaison, which can only happen after a trusting relationship is built.

Have you recognized patterns in some regions? Do you think that analyzing and exploring this kind of multicultural risk management would be of benefit to organizations?

3 thoughts on “Navigating Risk Management Around the Globe

  1. Santiago,
    Great insights. It helps explain the difficulties I may face when trying to fit global insurance around local exposures. I am fortunate to work with skilled brokers around the world that can help facilitate local transactions but now see their efforts in light of the difficulties they may be facing in local markets.

  2. Great article Santiago,
    World Wide Programs are difficult to implement, not only due the different types of risks, but especially due to different market development and solutions. Another big issue is bringing everyone involved into the same page, as guidelines and company objectives.

  3. Santiago, thanks for the outstanding comments!
    I see good value in discussing these topics, as people in different countries and regions work unalike, and this is one of the challenges that risk managers face working around the globe, in addition to the legal and economic uniqueness by country, just to mention some.
    Regarding Latin America, I would mention that in addition to insurance, some companies have been working on other risk management options. I was impressed at the 2016 Latin American Forum, where professionals from different industries presented, with brokers or by themselves, their Enterprise Risk Management (ERM) experiences.
    From a global perspective, I have noticed that in some cases the insurer – broker and/or insurer relationship depends on how the providers fulfill the insured’s needs.
    About patterns in some regions, some of them could be recognized after having better understanding of the culture; however, in some cases, it is important to leverage any local initiatives with a local partner.
    Given the multiples options to address these and other challenges that risk managers deal with, there could be methodologies or resources to address them. Based on the knowledge and experience acquired during my career, I developed a methodology, “The 7C’s of Risk Management” (see path below), which helps risk managers to address these challenges, and master their skills.
    I will be interesting in hearing form other colleagues regarding their perspectives and experiences working in different countries/regions.
    Path to “The 7C’s of Risk Management:
    https://www.rims.org/RiskKnowledge/RiskKnowledgeMain.aspx?article_key=6044DC4C-1404-4693-9758-EC5497484486

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