AIG risk specialists (l-r) Gaurang Gada, liabilities risk consultant-Asia; David Hill, head of Liabilities Risk Consulting-Asia Pacific; Kumar Rajasegaram, regional account engineer-Asia Pacific; and Malek Ali, regional Marine Loss Control managerPreventing loss with a thorough analysis of the business environment is a vital risk management measure that corporations must consider on a daily basis as well as with a long-term view.
Institute of Corporate Directors (ICD) chairman Francis Estrada at a Fellows’ Lunch on February 28 said that businesses cannot possibly eliminate all risks. “We strive to mitigate risks to the extent possible, but we must still continue to do business. We just have to determine which risks to carry or to lay away.”
At the same forum, AIG head of Liability Risk Consulting-Asia Pacific David Hill said the risk environment is changing due to new threats and new business models, and “risks strategies are demanded to address new risks on top of old” or long-standing risks.
According to him, a host of factors accelerates risk development such as changing regulatory environment, tolerance and accountability; political embargoes, sanctions and posturing; and new vectors like the Internet of Things, quantum computing and artificial intelligence.
Hill believes that while insurance is a critical risk management component, innovation in risk is as important as innovation in a core business. “Understanding risk and avoiding losses rewards in multiples,” he said.
Also presenting were AIG regional account engineer-Asia Pacific Kumar Rajasegaram, who gave case studies on property loss control; AIG regional marine loss control manager Malek Ali, who gave case studies on marine loss control; and AIG liabilities risk consultantAsia Gaurang Gada, who gave case studies on the supplier risk and quantifying worker-related risks of injury and ill health.
Project cargo insurance includes onshore inspection at point of origin, at-sea protection and onshore delivery to the destination. Ali said many companies insure cargo but neglect to consider business loss from any damage to the cargo.
“For example, a $5-million transformer may be insured in transit, but how do you cover for the business loss when the transformer is not delivered on time to its destination?,” he said.
Supplier risks relate to wrongdoing by suppliers, which may impact the corporation in terms of reduced or suspended operations and reputational damage.
“The client may not have done anything wrong but it may be severely affected by whatever happens to its supplier,” Gada said.
Gada also said that accidents have direct costs, which can be insured, and indirect costs including goodwill, which cannot be insured but which may cost three to 10 times the direct costs.
“The economic cost of workrelated injuries and ill health is borne by the employer, the worker and the community…. There is a construction boom in the Philippines, but research points to three fatalities every week in the Philippines,” he said.
Gada believes corporate risk management has largely remained on the “compliance with regulation mode” instead of being proactive to prevent losses. AIG’s Client Risk Solutions can help identify loss drivers to reduce the likelihood of risks becoming actual incidents.(Story/Photos by: Carla Paras-Sison)