EVENT REVIEW Carrie Cook reports from Aon Risk Solutions recent panel - PDF document

EVENT REVIEW Carrie Cook reports from Aon Risk Solutions’ recent panel event which brought together industry leaders to discuss current and future trends on the risk management agenda hat better way to identify challenge which all members of the panel PANELLISTS key risks currently on identified as a growing issue – was regulatory Tom Wallace the agenda for financial pressure. Tom Wallace, partner at law firm Partner, K&L Gates LLP institutions than to bring K&L Gates LLP, said he believes regulatory together leading financial risk and compliance failures, the kind of Andrew Massey industry practitioners, representatives scandals which can result in uninsurable Partner, K&L Gates LLP and regulatory experts who are faced with fines, have become an increasingly Nick Triggs overcoming these challenges every day? prominent risk factor for the financial Head of international That’s exactly what Aon Risk Solutions did services M&A market over the past few corporate fjnance, Aon at its recent Financial Services Conference years. Wallace’s colleague, Andrew Massey, Benfjeld held at the illustrious Barber Surgeon’s Hall a financial services lawyer at K&L Gates, Andrew Myhill in the City of London last month. The half- agreed. “It goes beyond the risk that there is UK public affairs manager, day event provided an exclusive opportunity a breach in your organisation; it’s the risks Zurich Insurance for select financial services firms to discuss associated with keeping abreast of the Ed Smerdon current hot topics, including the possible tsunami of regulation that’s out there; this Partner, Sedgwick LLP impact of Brexit on business operations; never-ending wave of new developments Alexander Verweij fintech firms and their growing influence on that legal, compliance and business Managing director, head of UK how consumers bank; and how increased personnel need to be aware of.” and Europe, talent, awards regulation is adding to the talent acquisition Exacerbating this problem is the frequent and performance, Aon Hewitt challenge. uncertainty around the regulatory The Risk Universe was invited along to requirements affecting the industry, he a panel discussion, chaired by Dominic added. “That might be in the actual drafting Christian, CEO of Aon UK Ltd and executive [of legislation and regulation]; it might be chairman of Aon Benfield International, because the regulator is not necessarily aimed at dissecting industry ‘mega trends’; clear as to the objective it’s trying to achieve; key risks and opportunities currently or it might be that there is conflict between concerning those in financial services. regulators – which we are seeing at the European level in relation to remuneration REGULATION rules. We have ESMA taking a different view The panel provided an interesting range of from the EBA on the interpretation of perspectives; from legal representatives who proportionality, which ultimately will affect shared their thoughts on current regulatory what remuneration structures are permitted developments, to public affairs specialists in the UK and throughout Europe.” and corporate finance heads. One very clear Regulatory risk is also a problem from a theme throughout the discussion – and a mergers and acquisitions perspective, said 30 The Risk Universe June 2016

Event review Nick Triggs, head of international corporate finance at Aon Benfield. “Since the financial “There is a feeling out crisis – since the pendulum has swung from there within the industry probably too-light touch regulation, to the other end – we’ve seen transactions stopped that we’ve had our by the regulator, which we hadn’t really seen beating from politicians; before.” In Triggs’ experience, the regulators we’ve weathered it and have become much more cautious, even about transactions between well-established we’re through the worst. buyers and, due to consumer pressure, have And, actually, it’s far had more involvement in those transactions, making the whole process costly and “more from it” painful”. ANDREW MYHILL TECHNOLOGY UK public affairs manager Technology was discussed at length, both Zurich Insurance as a threat to business and an opportunity. Wallace warned firms to avoid the temptation to jump straight into the fintech race without first having the right expertise ➔ June 2016 The Risk Universe 31

Event review and a sound strategy in place. Intellectual coming months as governments and property rights and data regulation are two authorities come under increasing pressure important areas to be considered here and to show they are being proactive in the firms need to ensure any technology projects battle against illicit business activities. and investments they embark upon are “Big, international institutions are going to managed by persons with appropriate get drawn into corruption scandals,” he financial services and technology investment predicted. He added that firms wanting to experience and executed after thorough do global business will inevitably confront technical, regulatory and legal analysis, corruption because they will be operating in says Wallace. countries where attitudes to bribery may be Another law expert on the panel, Ed different to perhaps the UK, the US or other Smerdon, a partner at Sedgwick LLP, Western nations. “That won’t be an excuse elaborated on the technical expertise issue when you’re investigated by the SFO under and suggested more experts in cyber crime the Bribery Act, which makes it very clear are needed within banking and insurance. you need to do your due diligence,” warned He has witnessed a marked uptake in cyber- Smerdon. “The Bribery Act is just the related claims in financial services in recent beginning; there is a lot more that is being years. “These organisations move large enacted, or has been enacted, in the last amounts of money around the world all the couple of years.” He suggested creating time and there are going to be chinks in the clear-cut policies and visible roles within the system,” he said. “It’s a continuously organisation which hold accountability for dynamic field. You think your cyber defence bribery and corruption issues as a sensible is fully secure and up to date this year; but step towards managing this risk. next year it won’t be,” he said. The panellists agreed institutions will need to get inside the REPUTATION AND POLITICS minds of cyber criminals if they are going to The subject of reputational impact was successfully mitigate this risk. touched upon several times in the discussion, probably due to its wide- BRIBERY AND CORRUPTION reaching nature and the fact it is linked with Crime prevention measures are continuing virtually every other type of risk. A number to grow in importance in risk management of high-profile examples of companies and can themselves present a risk to suffering damages due to reputational business, in the form of new, more stringent issues in recent years has highlighted the legislation. In Smerdon’s opinion, bribery extent of the problem and, as Smerdon and corruption will be in the spotlight in pointed out, a good reputation can be lost very quickly, but it’s a “long, slow process to get your reputation back”. Closely linked to this is vendor or third-party risk, which many firms are simply not considering deeply enough, says Massey: “Does the business have a true understanding of that service provider’s ability to deal with various issues or scenarios that could be thrown at them? Are their business continuity practices sufficiently robust?” Further complicating this is the way many service providers sub- contract work to other entities in what may already be a highly concentrated market, giving firms even less control and visibility over vulnerabilities that may affect their business and increasing the risk of industry- wide failings, says Massey. Andrew Myhill, UK public affairs manager 32 The Risk Universe June 2016