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Explore the critical connection between risk management and business resilience, as presented by industry leaders Dave Henderson and Tom Roche. This workshop delves into lessons learned from global events like the Japan earthquake and Thailand floods, emphasizing the importance of understanding supply chains, strategic risk management, and the role of senior management in supporting these initiatives. Gain insights into best practices for mitigating risks and fostering resilience as a competitive advantage, with a focus on integrating risk management into corporate objectives.
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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
