The Coronavirus Pandemic has taught us on the one hand how networked we are today and how quickly we slide into a crisis. On the other hand, companies would have to be in much greater pain if they really wanted to learn from it and prepare themselves appropriately for future events, says Benedikt Hintze, Head of Insurance & Senior Risk Management Officer at Georgsmarienhütte Holding GmbH, with whom Martin Schachtschneider, Head of Business Development BELFOR Germany, spoke about risk management during and after Coronavirus.
According to the Allianz Risk Barometer 2020, cyber attacks continue to be the number one risk for companies: Aviation, financial sector, public sector/government, services, technology and telecommunications. They are particularly affected: small businesses.
Certainly, virtual attacks, data theft or the paralysis of entire productions are absolutely serious threats. However, Coronavirus has shifted our focus and brought the obvious back to the forefront.
Our economy and industry are highly fragile - the COVID-19 pandemic shows this very clearly. In the past, we have continually optimised our "Just in Time" philosophy. Supply chains have been adjusted to each other to a maximum extent across national borders. Fast and cheap, lean and smart were the keywords.
Coronavirus illustrates what happens if a country or region is unable to deliver. Stocks of supplier products are quickly exhausted and then production suddenly comes to a complete standstill.
Business interruptions are considered the second biggest threat to companies by the 2,718 risk management experts surveyed in the Allianz Risk Barometer in 2020.
New buzzwords dominate the discussion. All of a sudden, resilience is in demand and redundancies are attractive again.
Risk managers are being listened to seriously. And that is a good thing, because in a world of ever "faster, higher, further" risk provisioning often falls by the wayside in favour of lean processes and optimisation requirements. The latest FERMA Report also shows the growing importance of risk management for the maintenance and recovery of companies in the post-Coronavirus era. Risk management is increasingly seen in terms of resilience and sustainability.
At first glance, the problem map seems unchanged. The main risks are considered to be short (twelve months) and medium-term (three years) cyber attacks, data theft and fraud.
In second place after digital risks is the uncertain economic development - both in the short and medium term. This certainly also reflects the fact that in the outgoing Coronavirus period the future is highly uncertain. Will new waves of the pandemic come? How quickly will companies, regions or even entire countries recover? Will there even be a redistribution of economic power on the geopolitical map? How international will the flow of goods remain?
Sustainability is clearly one of the three top risks. This is particularly true when taking a long-term view (ten years). The main risks here are climate change, environmental damage and extreme weather phenomena.
According to the Allianz Risk Barometer 2020, risk management experts also rate this topic with increasing urgency - a particularly large risk, especially for the tourism industry and agriculture.
In his statement, FERMA President Dirk Wegener summarises what Covid-19 has focused on: digital risks, economic uncertainty and questions of sustainability. This applies across all industries and will not change in its importance so quickly.
The insurance market is also becoming tougher. 90 percent of the risk managers surveyed fear restrictions or even exclusion criteria for certain risks. The overwhelming majority also see pressure on conditions and concentration in the insurance market in general - with premium increases.
So how do you deal with uncertainties or - even better - protect yourself against these uncertainties if even insurance does not provide comprehensive protection? First of all, Coronavirus is by no means a black swan, at most a grey swan. Pandemics had already been predicted by experts on several occasions, and SARS was actually a harbinger that could not be ignored. Nevertheless, the question remains: what do we do if we have to deal with a real black swan?
The first two issues of the BELFOR customer magazine "Solutions" already featured black swans as a central theme. First of all, good and professional risk prevention is the beginning of all considerations. Crisis management plans should be developed and tested at an early stage before a real crisis occurs. The premise is to prevent harm to people and to maintain or restore operational capability as quickly as possible.
According to the Allianz Risk Barometer 2020, operational disruptions are the number 1 risk for companies: Chemical & pharmaceutical industry, food & catering, heavy industry, manufacturers and suppliers (e.g. automotive), oil and gas industry, energy industry, retail and wholesale & transport.
Scenario management" plays an important role in the development of crisis management plans. Through the interaction of future, risk and disaster management, expected scenarios can be developed for which one can prepare. These scenarios naturally include cyber attacks, but also classic triggers such as fires, storms, earthquakes, heavy rainfall and even biological contamination such as Covid-19.
Business continuity is a question of planning and thus of responsiveness in case of crisis. Although every company is individual, it makes no sense to reinvent the wheel.
But one simple fact is very real: if companies prepare themselves and are able to deal with risks flexibly, this increases their basic abilities to deal with threats enormously. And it is precisely this resilience that we need, no matter what happens. Also for a constructive dialogue with the relevant insurers in the sense of a positive assessment of better prevention.