More chief risk officer roles needed in Asia, expert says

Andrew Chan, Senior Manager, Risk & Opportunity at CLP Power Hong believes that risk managers should position themselves as risk leaders and elevate risk-related conversations to the C-suite level.

Chan, who has also held key global risk and insurance roles at Hong Kong Shanghai Hotels, Dairy Farm Group and PCCW, is a speaker at the 2024 Global Programmes Asia conference, to be held in Singapore on 28 November 2024.

At his presentation, titled Getting a good deal from the insurance market, he plans to tell conference participants that risk professionals need to take a more holistic approach to get the most out of their risk and insurance programs.

He notes that particularly in Asia, risk managers aren’t always at the C-suite level. “I think the risk landscape is becoming more mature in Australia but in Hong Kong and Asia, there aren’t a lot of chief risk officer roles,” he says.

A holistic approach

Chan says a holistic approach, that includes insurers, risk engineers and brokers, is crucial in elevating risk-related conversations to the C-suite level in Asia.

Importantly, he says it makes the process of calculating the total cost of risk report more scientific and enables a better C-suite understanding of how much global risk the organisation is exposed to, its claims history, how much it's paying for mitigation and cover and how much it’s willing to lose.

Chan adds that cost of risk reports must present a complete and comprehensive picture of each risk and the levels of limits and deductibles required “so that when you negotiate with an insurer, you actually know how much you need and are not overselling your risks”.

He says it can also help the C-suite executives better understand any proposed insurance program or coverage and reduce the chance that the brokers will just recommend a ballpark figure that doesn’t accurately translate to the organisation’s situation.

“Financial quantification is crucial in creating that clearer picture for decision makers to make smart decisions based on calculated risk,” says Chan. “In a way, the total cost of risk report is like a key to the treasure chest.”

Chan notes that the total cost risk report is a live document that is constantly changing and requires regular updating.

He stresses that taking a holistic approach is not just important for insurance renewals. It can also help the C-suite when it comes to risk mitigation and risk management strategies. Here, a lot depends on timing.

For example, he says it’s no good bringing in the different parties after, say, a new building is completed and then hearing that a sprinkler or door needs to be added to mitigate risks.

Adding value

Chan believes risk managers can better inform the C-suite via on how to use captives strategically after thorough analyses of all the data and claims history.

“I've seen companies before where there is actually no risk and where using a captive is a waste of time. You need to cover your top risks and use your captive to get the best deal.

“Don't look at the captive as a cost centre. Look at it as a business and analyse how you run that business.”

Chan says many corporates are putting more effort into analysing claims histories and deciding what their top risks are these days and whether these should be in the captive.

He says some may no longer be risks and insurers may also be covering others that were unpopular in the past.

Chan adds that the C-suite can benefit from the in-depth knowledge risk managers have of what is happening in the insurance market and of emerging risks such as the rise in climate change and natural disasters.

“Risk managers are going to be much more aware of where insurers are focused each year, how their organisation fits in with this and how insurers will look at its risk,” he says.

The importance of building knowledge

To boost their outside knowledge, Chan says risk managers need to attend risk conferences and regularly talk to underwriters. They should also discuss emerging risks with brokers, insurers and other risk managers.

Chan believes that it is important to learn not only what’s happening in your own industry but also in other industries especially when it comes to areas such as cyber security, blockchain and artificial intelligence – and how you can apply that or how that are will eventually disrupt you. “It’s about continuous learning,” he says.

“The deeper your knowledge, the harder it will be for the insurers or brokers to take advantage of you,” he says.

“It’s about thoroughly understanding your organisation’s risks and educating insurers on your risks because they may assume things and not really understand your organisation.

“When you understand and can quantify your risk very well through a holistic picture, there’s a ripple effect. You can stand your ground a lot better and are in a position much better position when you're at the table negotiation.”

As the world changes rapidly and constantly, Chan finishes with this advice for risk managers: “Adapt what is useful, reject what is useless and add what is specifically your own.”