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Risk Management & Business Success. Dave Henderson, Claims Manager Tom Roche, Engineering Manager 16 th June 2014. FM Global – 179 Years. Leading commercial property insurer Underwriting and loss prevention model: The majority of losses are preventable
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Risk Management & Business Success Dave Henderson, Claims Manager Tom Roche, Engineering Manager 16th June 2014
FM Global – 179 Years • Leading commercial property insurer • Underwriting and loss prevention model: • The majority of losses are preventable • When you’re resilient, you’re in business • Airmic Associate Partner
Overview • Observations on resilience • Workshop – ‘Corporate Global Plc’ • Summary of the key thoughts
Asia - a good opportunity or risky choice? • Asia is the world’s factory • accounts for 40% of the world’s manufacturing output • The world’s largest and most populous continent • hosts 60% of the world’s population
US-based listed companies on Fortune 500 • Both companies: • Make electronic equipment • Have products that rely on computer processors • Have a critical reliance on semi-conductors (internal) and on BT Epoxy & Silicon Wafers (external) • 90% of global BT supply and 64% of Silicon wafer is sourced from Japan
Key Financial Impact of disruption: • 13% drop in revenues in Q2 2011 • $97m decline in profit in Q2 2011 source: wsj.com • TI stated in Q2 results press release that financial impact was directly attributed to … • “Delay in moving production to alternate factories” • “Insufficient existing inventory” • “Lack of availability of critical raw materials”
Intel Q2 financial results: • Revenues up 22% to $13.1bn in Q2 2011 • Net Income up 10% to $3.2bn in Q2 2011 source: Jon Peddie Research • Intel stated in a press release at end of March that … • “The current crisis in Japan will not disrupt processor production” and “nothing is sole-sourced” • “BCPs have been activated to ensure no material loss of production”
Impact on market capitalisation Japan Earthquake. 03/11/2011
Thailand floods Thailand Floods 2011 Estimated Losses: 4th costliest disaster ever More than $50 billion economic losses Up to 80% supply chain-related Was it predictable???
Market analyst: “Seagate stands to make the most out of the crisis by gaining market share at the expense of Western Digital ”
Impact on share price Thai Floods – Q3 2011
RESILIENCE WHAT? WHERE? WHY? HOW
Workshop • Treat Corporate Global Plc as your company • The room will be split in to 6 groups • Each group will consider 3 different aspects of the acquisition • You will rotate around 3 tables, building upon the discussion of the previous group • 10 minutes on each table – write down your ideas! • Finish with feedback from each group
Workshop A & D: Acquisition details & local considerations B & E: Risk identification, quantification & mitigation C & F: Understanding the business
Workshop – takeaways… • Identify, quantify and mitigate the risks • The information is out there • Use your networks • Context is key • What is the company trying to achieve? • What are the consequences? • Integrate in to the risk management framework • Corporate standards vs. local standards • Involve your service partners
Workshop – takeaways… • What? Physical assets • Where? Risks and local challenges • How? Servicing and integration • Why? Understand the business
What did Companies like Intel do right? • They had … • A clear understanding of entire supply chain • Identified ALL critical components of supply chain • An understanding of the likely impact if supply is disrupted • Created some business model resilience • Appropriate business continuity strategies in place • Engaged third parties in the process
Summary of key thoughts • Strategic risk management can only be implemented with strong senior management support • Risk managers must demonstrate how critical risk management is to the organisation to fulfil its objectives.
Communicating to the board Thai Floods – Q3 2011
What have we achieved? • Recent case studies: Asian Disasters • Lessons to be learned • Resilience as a competitive advantage • Workshop • A practical acquisition framework • Tools to understand and mitigate risk • Focus on the corporate strategy • Communicating to the board • Supporting corporate objectives
