Risk Alert or Risk Averse for Business Sustainability Business - - PowerPoint PPT Presentation

Risk Alert or Risk Averse for Business Sustainability Business Sustainability

• G. Simpson, FCII

Agenda

Perspectives on Risk Emerging Trends on Risk Management RM and Sustainability Everything Matters Everything Matters Employee Engagement Returns on Employee Business Liability Risks Lessons from Japan for the Risk Alert

The first step in the risk management process is to acknowledge the reality

• process is to acknowledge the reality
• f risk. Denial is a common tact that

substitutes deliberate ignorance for thoughtful planning

Emerging Trends on RM

Access to capital increasingly dependent on RM value/commitment Listed companies share is value increasingly tied to board commitment and RM depth and tied to board commitment and RM depth and breadth in company

• !!

The mature perspective of Risk Management

For the most part, risks are perceived as any thing or event that could stand in the way of the organization achieving its objectives. Hence, it is not about being 'risk averse'. Risk Hence, it is not about being 'risk averse'. Risk management is not aimed at avoiding risks. Its focus is on identifying, evaluating, controlling and "mastering" risks.

RM Definition

Risk Management spans policies, procedures, and practices involved in identification, analysis, assessment, control, avoidance, minimization or elimination of unacceptable risks. risks. A firm may use risk assumption, risk avoidance, risk retention, risk transfer, or any

• ther strategy (or combination of strategies)

in proper management of future events.

RM leads to Opportunities

Risk management also means taking advantage of opportunities and taking risks based on an informed decision and risks based on an informed decision and analysis of the outcomes.

A good rule of thumb is to assume that everything matters.

Quote

everything matters. Richard Thaler

RM issues for the Risk Alert

Employee Engagement levels Business Interruptions & or liabilities due to indirect occurrences indirect occurrences Cyber Liability Institution with systems and or culture that fails to capture innovative possibilities Lived values as a Corporate Citizen

Employee Engagement cont’d

Leading companies focus on harnessing the discretionary effort of employees. This has made the difference to how quickly some companies recover from the downturn. Employee Engagement dropped from 60% in 2009 to 56% in 2010 in the regions researched.

GeorgiaSimpson@TheCorpor ateClinic.com

Correlation Between Employee Engagement and Total Shareholder Returns

There is strong correlation between employee engagement and financial performance. Organizations with high levels of engagement (65% or greater) continue to outperform their competitors competitors the total stock market index and posted total shareholder returns of companies with 65% or more EE was 22% higher than average in 2010. companies with low engagement (45% or less) had a total shareholder return that was 28% lower than the average

GeorgiaSimpson@TheCorporateClinic.com

Build Engagement – Go the extra mile to show care At most companies, new hires have to wait 12 months before taking vacation. But Windings lets them accrue it after three months. The lets them accrue it after three months. The thought process was this: “We put people on our health plan after 90 days, and being able to take vacation early certainly costs less than two weeks’ vacation. So why not?”

GeorgiaSimpson@TheCorporateClinic.com

Best Employers

International Best Employer research reveals how organizations differentiate and achieve a competitive advantage through their people. The benefits of being a Best Employer are well documented, from improved retention to increased productivity.

GeorgiaSimpson@TheCorporateClinic.com

Low EE Impact on Businesses

According to surveys conducted by LSA Global Learning Solutions, “lower employee engagement scores result in:

• 12% lower profits
• 19% lower operating income
• 28% lower earnings per share

http://soniajaspal.wordpress.com/2011/06/18/employee-disengagement-risks/

Returns on High EE

Higher employee engagement scores correlate to:

• 18% greater productivity
• 18% greater productivity
• 12% higher customer satisfaction
• 51% less voluntary turnover”

http://soniajaspal.wordpress.com/2011/06/18/employee-disengagement-risks/

Correlation Between Employee Engagement and Total Shareholder Returns

The organizations that improve engagement during challenging times focus on a number of factors that differentiate them in the marketplace. These factors include:

• 1. focusing on long-term strategies eg – good pension

plans plans

• 2. demanding measurable actions,
• 3. involving all stakeholders,
• 4. understanding key employee segments, and

broadening the range of assessment tools and analytics.

"""!!### $$ $$!%

GeorgiaSimpson@TheCorporateClinic.com

Correlation Between Employee Engagement and Total Shareholder Returns

• 5. What company stands for – stated

employer value proposition and consistency with day to day reality of work

• 6. Proactively respond to the environment
• 6. Proactively respond to the environment

and changing workforce needs

• 7. They evolve but remain true to the values

that made them successful and keep them well positioned for success

"""!!### $$ $$!%

GeorgiaSimpson@TheCorporateClinic.com

Employment Engagement Drivers

The EED models that impact performance are inter-related. They do not get the same results when applied in isolation. Assessment focus would be“What really makes a difference to employees”, i.e. impact

• analysis. Aim to identify and prioritize factors

that drive engagement.

GeorgiaSimpson@TheCorpor ateClinic.com

Approaches to Employee Engagement Noteworthy open to shift from traditional approach to managing employee benefits Employee differentiation based on performance performance Shift from equality to equity - rewarding according to contributions

GeorgiaSimpson@TheCorpor ateClinic.com

Top Employee Engagement Drivers

• 1. Career Opportunities
• 2. Brand alignment
• 3. Recognition
• 4. People/HR practices
• 5. Organisation reputation (in top 3 for North America)
• 5. Organisation reputation (in top 3 for North America)
• 6. Managing Performance – (in top 3 for North America)
• 7. Pay (in top 5 for Asia)

NB Drivers are also influenced by cultural context

GeorgiaSimpson@TheCorpor ateClinic.com

This relates to injury or damage due to malpractice, or errors-and-omissions Professional Liability or Errors and Omissions Risks Distinguished from general business liability because of the specialized nature of the

• liability. If a business provides a service, it

would be wise to consider professional liability insurance.

Persons requiring liability protection include

• stock brokers
• architects,
• physician, surgeons,

Professional cont’d

• physician, surgeons,
• lawyers, accountants, engineers,
• insurance agents.

Increasingly professionals in the information technology industry are exposed to professional negligence.

Professionals have broad knowledge in their field and are expected to operate at a certain level of competence.

Professionals cont’d

If they fail to perform their duties in line with prevailing standards specific to their field they can be held responsible by law. Also called Errors and Omissions.

Definition: First and third party expenses resulting from internet, networks and computerised information assets Potential damages include:

• loss of company’s data and the cost to restore it,
• the cost of defending against or settling a third party claim

Risks related to Cyber Liability

• the cost of defending against or settling a third party claim
• the cost of cyber extortion,
• damage to reputation,
• the cost to notify individuals whose personal information

may have been compromised and

• the cost to pay for credit monitoring for those individuals if

required by law.

• http://sandiegometro.com/2011/03/cyber-liability-managing-the-risks/

Understanding firm’s exposures Determine how to manage these exposures Centralize IT management and develop

Cyber Liability – Risk Control

Centralize IT management and develop enforceable policies and procedures across your network. Monitor compliance with policy

Lessons from Japan for the Risk Alert Risk Alert

No damage but losses

Inability to conduct businesses due to suppliers experiencing disaster Inability to access place of business Extra expenses to find alternate solutions Extra expenses to find alternate solutions Extra expenses to prove extent of loss Customers inability to take delivery Solution: Contingent Business Interruption Strategies

Test questions

Do the processes improve compliance and access to government/government services? Do the RM practices facilitate proactive management decision-making management decision-making Do they promote sound resource allocation Are they easily understood and used (plain language, user-friendliness)

Guidelines in selecting RM strategies

• Helps managers understand the context and implications of risk
• Demonstrates communication/involvement with stakeholders
• Facilitates cultural shifts and change management
• Builds on existing knowledge, lessons learned in the organization
• Considers opportunity costs
• Has a clear and potentially applicable accountability or governance
• Has a clear and potentially applicable accountability or governance

framework

• Makes effective use of audit and evaluation resources
• Links horizontally in the organization
• Integrates well with the existing management framework,

processes and practices

THANK YOU!!!

Ladies & Gentlemen

THANK YOU!!!