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Thursday 19 April 2018

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An instinct for risk

Written by David Adams
December 2013

As we start a new year, how is the risk software market placed to take on another round of challenges? David Adams finds out

Risk management has, arguably, a higher profile than ever before, yet it remains frequently still under-resourced. But while the last few years have been a challenge for many risk managers, it may be that, in the long term, the most significant legacy of this period will be a vast improvement in how providers of risk software understand the needs of the market.

End user requirements vary endlessly, so vendors have sought to develop software that can be configured to match those needs. Many vendors now provide cloud-based, hosted solutions. The business benefits of using cloud seem all but universally accepted today, although, as Ayaz Merchant, of NTT Data Figtree, points out, some organisations still want to host their own risk data, in a private cloud, embracing the efficiencies cloud can offer, but maintaining full control of the data.

His company’s solution allows end users to select from a range of modules to construct their own tailored solution. End-users include plant technology company Syngenta, which has used it to replace a spreadsheet-based system. Insurance manager, Martina Achermann explains their modus operandi: “We have implemented an incident tool that allows all entities to report claims and losses,” she says. “Group finance and other interested parties receive regular reports, so all stakeholders have the latest data. It’s a great improvement.”

But such great improvements cost money. Kelly Lehmann, general manager at Stewart Business Software, says that only during the past 18 months have many budgets been freed up again after spending was cut back in 2008. And, although spreadsheets might seem like a cheaper option, using them may lead to organisations buying extra insurance they don’t need; or not buying enough and having to pay for losses themselves.

A steady stream of risk disaster news stories, of both man-made and natural origin, along with regulatory demands that affect so many different sectors, have helped keep risk at the forefront of executives’ minds. Phil Walden, a director at JCAD, cites the contrasting examples of small law firms now required by regulators to take risk more seriously; and of financial companies forced to do so by regulations including Solvency II.

Showing ROI

Even so, risk managers now have to justify technology spend in return on investment (ROI) terms, which, while traditionally not easy to prove for risk management, can more easily be tracked through the tools on offer in this market. ROI can now be easily tracked where a particular risk has been highlighted and the subsequent corrective action taken.

Steve Cloutman, EMEA managing director at Aon eSolutions, says his clients prove ROI by pointing to efficiency savings, improved access to reliable data and by giving insurers better information, so helping to reduce premiums.

The brewer Marstons has been using risk management technology supplied by CS Stars since May 2012, replacing a paper-based process. It needed a solution capable of handling the risks associated with the large number of locations from which it operates – Marstons has 500 managed pubs – and with its exposure to public liability claims, explains corporate risk director, Jonathan Moore. It also needed to facilitate investigation of incidents as soon as possible, in part because of relatively fast staff turnover in its pubs.

“We don’t have in-house claims handlers, so when an incident becomes a claim we have interaction between the pub manager, area manager, head office, our broker Marsh, Gallagher Basset; and maybe our solicitors,” says Moore. “Having one system that all those parties can use was key.” The solution also allows the company to look at the types of incidents occurring in its different pub formats to identify trends in the accident statistics.

Risk management software can offer end users multiple use cases and more than one way to consume and analyse data. Aon eSolutions’ Cloutman reports strong growth in 2013, as large organisations including retailers and manufacturers sought solutions that help them understand geographical distribution of risks. “We’ve enhanced drill-down and better mapping,” he says. “People can see trends geographically and integrate that with other data sources.”

He and others highlight the importance of swift access to that information, often through use of mobile technologies. Covalent Software provides governance, risk and compliance, employee performance management and corporate performance management software. CEO Peter McHugh says 2013 has seen a lot of development work around mobile, particularly tablets, both to report to senior management and to capture risk data

Maintaining flexibility

Elsewhere, JCAD’s CORE software is being used to manage compliance as well as risk. End users include Anglian Water Group (AWG), which uses the system to manage its financial covenants and monitor financial and IT assurance controls, as well as to manage risk. The solution is hosted by JCAD, but flexible enough to take some information from the spreadsheets that some AWG managers still prefer to use.

“Printouts go to the board and to the audit committee; and directors of the business units review the risk register in detail every six months,” says Chris Winfield, business risk manager at AWG. “The primary benefit is time: not having to fiddle around with spreadsheets. That means you have consistency of information that is easier to present at the top level.”
One trend that has perhaps been suppressed to some extent in recent years has been the drive to create enterprise risk management (ERM) solutions, but Aon’s Cloutman says he is now seeing renewed demand in this space.

Insurers are also taking advantage of better risk management software. MSM Risk Management CEO Thomas Coles reports insurers using its software to automate property surveys, thus allowing the highly qualified experts previously responsible for this work to be redeployed where they are most needed.

Among MSM’s clientele is the insurer QBE, which reports a significant improvement in loss ratios for key industry sector schemes through use of enhanced risk information. The solution enables the insurer to offer targeted support to more customers.

The company started using the system for professional lines clients in 2012 and now has several hundred of their own clients using it, for property, motor and liability lines as well as professional indemnity. It is considering extending the property and liability capabilities to a global property product, to support liability requirements in North America.

The solution creates rich, industry-specific, scheme-specific or client-specific questionnaires, to identify clients with the worst risk profile. QBE can then send risk consultants to work with them, so reducing claims. Underwriters then analyse the detailed risk data. “We can look at hot spots within an industry sector to understand what we should avoid; and to [identify] potentially distressed accounts, improve them and earn additional premium from our risk insight,” says Richard Thomas, head of risk solutions for European operations at QBE. The solution also helps strengthen relationships with brokers and clients, who also use the data generated to enhance risk management.

Whoever the end user might be, one universal theme seems to be a desire for user-friendly systems, because one or more elements of the solution will be accessed by non-specialist staff. As SBS’s Lehmann puts it, “The mechanism for getting information out of the organisation has to be something that staff can deal with alongside the day job. Keep it simple: give risk managers the ability to embed risk management throughout an organisation.”

Software that can do this for a huge range of organisations with vastly differing requirements is now available, but, warns Marstons’ Moore, the more work put into solution design by that organisation, the better. “The business has to be prepared to spend time developing the system,” he says.

“It is as good as the time and creativity put into designing it.”


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