Why risk management plays a key role in organisational resilience

2022 is set to be a busy year for Charlotte Hedemark Hancke. Besides her day job as Senior Risk Specialist in the Customer Success Risk Assurance team in SAP’s Global Risk & Assurance Services organization, she’s also a VP at FERMA and chair of the committee for the FERMA Forum, which is set to take place in Copenhagen in October 2022. The theme for the Forum will be “Transitioning Together – Risk Leadership in a Fast Changing Word” which conveys its members' ambition to move forward collectively for successful green and digital transitions, with risk leadership as a strategic compass.

Hancke is also on the committee of FERMA’s risk and insurance survey 2022 – the next edition of the European risk manager federation’s biennial survey. After two years in which risk managers around the world have seen their roles take on heightened importance in the face of the pandemic, she is interested to see what next year’s survey reveals when the results are published in May 2022.

“It will be our 11th edition of the survey,” she says. “The questions are not identical every year, but we try not to change them too much because it's good to be able to see some trends.

“We send the survey to all our member associations. It gives a unique insight into the views and the roles of risk managers across Europe; we get between 800 and 1000 responses. The key areas of focus for the next version are the role of the risk manager in digital transformation, the risk manager’s contribution to sustainability, and the risk manager’s response to the tougher insurance market conditions.”

The state of the insurance market remains a hot topic as insurance buyers grapple with increases in premiums, reductions in capacity, revised wordings and carriers withdrawing from certain risks.

“I think risk managers are very frustrated with the insurance market,” says Hancke. “After we were thrown into lockdown, it became clear that many traditional business interruption policies would not respond as businesses struggled to deal with the impact of the shutdown. Some of the national risk management associations started to call for state backed solutions, in partnership with the insurance sector, for businesses to deal with future health crises and other fast emerging or systemic risks, such as cyber or natural catastrophes. At EU level, FERMA put forward a proposal for a public-private catastrophe risk framework to help business cope more effectively with future systemic crises. Despite some initial optimism, we see very little progress at national and EU level so far.

“Risk managers would really like to see more tailor-made solutions for risks like reputation or cyber which cannot be tied to standard wordings,” she adds. “And with the market still hardening, we'll be in this situation for another one or two years - so it's going to be difficult in 2022. I think some large insurance buyers may not see the value of transferring their exposure into the insurance market for some lines of business. They might decide that it's time to self-insure, set up new captives or extend the use of existing captives. This is a trend that we can expect in 2022, even going into 2023.”

Another key theme to have emerged during the pandemic is the role of risk management to create resilience within organisations. This was the topic of FERMA’s recent report,  The role of risk management in corporate resilience, which presents the views of risk and insurance professionals and senior executives, surveyed in the summer of 2021.

“The pandemic has put this focus on resilience,” says Hancke. “The discussion is no longer about how to manage risks, but how companies can become more resilient in the face of a number of connected risks. It also showed the importance of having a comprehensive view of the risks in order to limit supply chain losses and reduce costs.

“More than a quarter of the respondents said they have already made changes to the supply chain, and that this is a continuing process. One risk manager noted that while her company previously focused just on the financial aspect of supply chain, it has now adopted a more holistic view, also looking at geographical footprint, compliance issues and other aspects.”

The report also shows how the focus on resilience raised the profile of European risk and insurance management.

“Many participants identified the executive team and risk function as mainly responsible for resilience, but it also suggests that risk functions are taking a far greater role now in managing resilience more holistically, especially in coordination with other functions in a company or organisation,” says Hancke. “The survey responses also showed that even though risk managers feel well equipped now, or better equipped, there is still more work to do, and risk management is a truly strategic priority.”

She has seen this borne out in her own organisation, where she was crisis management champion for several years before recently handing over the role to take on leadership of the project management office in SAP’s Customer Success Risk Assurance team.

“When the pandemic hit, I really gained hands on experience on crisis management,” she says. “For so many years, we've been doing these tabletop exercises as part of our global crisis management policy - and now I was executing those tasks instead of doing exercises.

“We had a global framework in place already and I'm proud of how fast SAP was able to set up a global pandemic task force, which built on our existing and well-established global crisis management framework. It showed how important it is that an organisation is robust and has the capacity to respond fast and actively when such an external risk materialises.

Hancke sees her involvement with FERMA and with Denmark’s risk management association DARIM (of which she is a board member) as key to her success as a risk manager.

“It can be a lonely job – often there’s only one of you in an organisation, and I felt that if I wanted to exchange views with peers, I needed to set myself up with this network. Being a member of both associations means that I can contribute to FERMA by relaying what's happening at national level and give feedback from FERMA to DARIM about what's happening at a European level.”

Another key focus of FERMA and its member associations is education. This is a topic very close to Hancke’s heart; she is Rimap certified and chair the selection committee for the FERMA-Lloyd’s programme. FERMA is developing a preparatory course for risk managers planning to take the Rimap exam and is offering a practical workshop for the Rimap alumni group.

Looking ahead to 2022, FERMA has just launched the 2022-2023 edition of the  FERMA Lloyd’s Professional Development Programme. It’s a joint educational and networking programme run by Lloyd’s and FERMA for risk managers in Europe. This programme is licensed by the FERMA Rimap certification programme and will grant CPD points to participants.

“This is a brilliant opportunity to learn to understand how Lloyd’s operates,” says Hancke, who took part in the programme in the 2017-2019 edition. “It really was an eye opener for me. And I got so passionate about it that I said I would like to drive this within FERMA.”

As for the broader risk management landscape, she predicts that the resilience of organisations will continue to be high on the agenda for risk managers.

“The pandemic is not over. Cyber threats are still on the rise, as are extreme weather conditions. We still have to expect shocks, be robust and plan for the unexpected. Good risk management will hopefully create resilience to a broad range of these circumstances and outcomes.

“Secondly, we see the green and the digital transitions, which bring new opportunities to organisations as well as risks - and there is the strategic aspect, where you take risks with maximum lucidity to support the targets of your company.

“FERMA has chosen as its 2022 theme: Transitioning together: Risk Leadership in a Fast Changing World. I think overall, we as risk managers still have to have an eye on the present and an eye on the future, because there are still new risks that could come up. But because of the pandemic we have learnt what resilience means and what robustness and the ability to respond fast mean.”