Canadian Underwriter

RISK MANAGEMENT ‘DOWN UNDER’– a Canadian perspective

August 1, 1999   by Lovel Vining, risk manager at Mayne Nickless Ltd. (Canada)

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Webster’s New Collegiate dictionary defines the word “risk” as being “the chance of loss or the perils to the subject matter of an insurance contract”. It also defines “management” as “the act or art of managing: control or direction.” Dictionaries, like many communication tools, are in practice subject to local interpretation. It was therefore highly intriguing to have recently been presented with the opportunity to evaluate the Australian risk management arena compared with the Canadian marketplace. While there were a great number of similarities between the two countries, the generally progressive and responsive attitude of the traditional insurance players operating “down under” was a refreshing surprise compared with some practices applied in the North American markets.

For many multi-national corporations the benefits derived from the “art of managing loss” globally have been known, appreciated and understood for many years. Indeed, many risk managers today are part of global risk management teams and, with other members of the team, each has the responsibility of managing their “local risks” within parameters and guidelines established by the parent company — one often located in some other part of the world.

For many of us, the sphere of influence that directs and guides the day to day activities comes from a corporate experience and philosophy based south of the 49th parallel. However for others, the influence can come from a little further afield. Mayne Nickless Ltd. is an organization with interests reaching around the globe. As such, the cultures and ways of doing business affecting these interests from country-to-country can be profound.

Founded in 1886, the company’s primary activity is a parcel delivery service which was incorporated as a public company in 1926. Today, Mayne Nickless is a leading Australian-based provider of integrated services with a primary focus on health related industries and logistics. Overall, the company employs some 29,000 people in nine countries including Australia, the United Kingdom, Ireland, Canada, Indonesia and Malaysia. With such a diverse sphere of operation, the identification and management of significant business risks is a key corporate goal and the proper management of risk is an ongoing objective that requires a commitment to effectively address key risk issues and find the correct solutions. The broad aim of the company in respect to the management of risk is to continually seek improvement in management systems and policies thus providing protection for employees and corporate assets without relying solely on risk financing or risk transfer techniques.

Global strategy involvement

As the director of risk management for the Northern Region division, I have responsibility for the implementation of the corporate risk management objectives for the Mayne Nickless group of businesses in North America and Europe. My interaction and involvement with the company’s global risk management group has always been positive and highly interactive. However, I have always wanted to be more directly involved in the development of the global risk strategies and with the placement of global programs. Earlier this year I was provided with just such an opportunity in the form of a secondment to Australia to assist with the development and implementation of the risk management strategies for the coming year and to facilitate the global insurance renewal process.

Despite many conversations I had with myself about the enormity of the task I had been asked to take on and the limited time frame I had to produce some significant results, I was pleased to discover quite quickly that the process was not nearly as difficult as I had first imagined it to be. One can only try to imagine how their brokers and the underwriters must have reacted to the news that someone from “America” was coming out to coordinate a renewal process and assist in the development of risk strategies!

To the surprise of all, we quickly learned that despite being half a world away, the style and practice of risk management in Australia was remarkably similar to methods and processes that had been utilized in Canada. While certainly there were some differences, it became evident immediately that we had more in common than not.

Canadian/Australian likeness

As a basic starting point, one need only examine the histories of Canada and Australia to discover similarities. We quickly learned that not only did we share a common history but also more importantly, we seemed to share similar values as a people. Discovering these shared values and ideals put us in the same arena and allowed us to develop an understanding of each other and allowed us to establish a level of communication. As is usually the case, the success or failure of any endeavor is ultimately dependent upon shared knowledge and experience and more importantly, upon ones ability to establish relationships and effectively communicate with others. Overcoming stereotypical perceptions on both sides was a huge breakthrough.

The task then became one of trying to understand the needs of the business entities. In this respect, as a ‘corporate employee’ with risk management responsibilities for diverse business entities, I view the business units as my clients. In other words, these businesses are the clients to whom I must sell the ideas and services and for whom value must be added. With the diversity of the Mayne Nickless companies this is no small task and thus there became an urgent need to understand the local environments the businesses operated in and how, as these environments changed, a shift in the local management philosophy could ultimately affect the management of risk. As a result of this process we quickly identified five key elements that formed the foundation for our global risk management strategy moving forward towards the year 2000. With these key elements and strategy firmly entrenched, discussions with the market became the next order of business.

Thankfully there are also a number of similarities between the insurance markets in the Northern Hemisphere and Australia. The Australian markets, like those in the North, are considered to be generally soft, however, local catastrophes ‘down under’ that I had previously not been aware of were testing the markets capacity with the result that some lines of cover were hardening. Despite this, pricing is still considered to be low and generally quite competitive. The bundling of programs, the use of aggregate retentions and the placement of multi year programs were considered to be realizable expectations.

Different attitudes

The major difference between the Canadian and Australian markets — at least from a perspective and experience based here and from Europe — was the attitude of the traditional insurance sectors.

Like elsewhere in the world, the Australian markets have been subject to rapid change. However, it appears that this rapid change has created a more innovative and responsive environment than we have experienced in the Northern Hemisphere. The Australian insurance markets displayed an open willingness to become partners committed to helping us achieve the key elements of our risk management strategy — a risk management strategy they firmly supported. Furthermore, there was an open commitment and willingness to provide their expertise and knowledge in the local environments where we may be lacking risk management resources. The “talk” that permeated conversations seemed based on the idea that it was their business to help the client reduce and manage risks. A cynic might suggest that such a conversation is to be expected — however, it did not result from poor performance or appear as a sales tool designed to “buy the business”, rather it was delivered as a philosophy based on a real desire to develop strategic partnerships with a commitment to long term, value-added relationships.

Of course, this is not to suggest that there are not markets with this type of philosophy in our half of the world. Indeed there are, but rather, this att
itude was clearly evident in all of the Australian conversations and with all of the markets. Basically, it was the norm rather than the exception “down under”.

Understanding local environments

It has often been said that the best approach to risk management is to use proven techniques and apply good old common sense.

In today’s global arena this still holds true. However, risk managers need to also understand the local environments they may be operating in. Understanding these “environments” is made easier with open channels of communication and with the involvement of a committed team. In the case of Mayne Nickless Ltd., the global team of brokers, underwriters and risk management personnel share a consistent culture of risk management that results in a truly integrated approach to the management of risk that allows us to realize business goals and objectives.

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