Risk management is a clear competition factor

A good level of risk management helps a company to economically recover from a disaster. Senior management and its ability to perform correctly in the aftermath of a crisis situation are of crucial importance. Risk management is therefore a clear competition factor.

Oxford Metrica recently published an international research study in which the impact of mass fatality events on the shareholder value is clarified. Companies can be clearly divided into companies which deal effectively with the situation and whose shareholder value after initially declining eventually strengthens and those companies whose shareholder value does not recover. In the latter group, the decrease in shareholder value became deeper and stayed permanently on a low level during one calendar year (261 trading days).


One of the key conclusions from the study was that the ability of senior management to perform in the aftermath of a disaster and in the crisis caused by the disaster is a significant factor in influencing the company’s value. 74 companies which suffered from disasters were analyzed in the research study.

A good level of risk management has become a significant competition factor and Enterprise Risk Management-process (ERM) has become an integral part of almost every major enterprise’s Corporate Governance system. At the same time, the demands which have been imposed have increased.

The task of the ERM process is to ensure the management of all of the types of risks, that can threaten business operations and which can prevent the company from reaching the targets that have been set for its business operations.

One of ERM’s important areas is accident risks. The task of If Industrial is to support our client companies in this area by providing insurance and risk management solutions which will secure the business of our clients. The solutions include client specific risk assessment, loss prevention, an insurance solution and claims handling.

With regard to risk assessment and loss prevention If Industrial has the largest RM unit in the Nordic insurance industry. In addition to property and loss of profits risks, it concentrates on cargo, health and safety and liability risks. The unit supports our client companies’ domestic and international risk management work.

One of the most challenging risk management areas is the management of liability risks. The risks in this area have not be so well predicted or evaluated in comparison to property and loss of profits, for example.

The health effects of chemicals and their associated liability issues might not appear until many decades have passed. The risks associated with components as part of a safety critical system can be difficult to analyse, too. In the same way, the risks connected with different product user groups can be a challenge from the assessment point of view.

Legislation varies in different countries and the laws can be amended and this can have an impact on risk assessment. There are also many different forms of liability. In addition to the third party and product liability areas, the an alysing of professional indemnity and directors’ and officers’ liability requires its own expertise.

If Industrial has carried out consultancy work connected to liability risk management for its client companies in Finland for over 10 years. The operating model has now been refocused and is being extended to every Nordic country. The new approach supports underwriting decisions and at the same time provides a good overall picture of the management of the liability risks in its entirety on an enterprise level for our client companies.

The operating model is based on co-operation with our client companies. The tools used to assess the risks are:

(1) Positioning and analysis of the liability risks
(2) A Navigator analysis of high risk liability areas.



The operating model is the same for all areas of risk management and it is based on co-operation between our client companies, brokers and If Industrial. Our objective is the correct identification and assessment of the risks and a thorough review of the risk management in a constructive manner. We handle identified risks openly with our client. The target is to produce a three year programme for improving the level of risk management.

Juha Ettala

http://ifnews.if.fi/en/