“zest for enlightenment” z/yen limited risk/reward managers 5-7 st helen’s place london ec3a...

“Zest for Enlightenment”

Z/Yen LimitedRisk/Reward Managers5-7 St Helen’s PlaceLondon EC3A 6AUUnited Kingdomtel: +44 (20) 7562-9562

www.zyen.com

© Z/Yen Limited2004

Be - Collaborative Risk Management

Collaboration, Risk and Reward in

Other IndustriesMichael Mainelli, Executive Chairman

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Agenda

“Great deeds are usually wrought at great risks”Herodotus

Governance and the risk society

Mutuals et al

Enterprise risk/reward management systems

Challenges for Property organisations

Information sharing

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Z/Yen Overview

Special – foremost risk/reward management firmServices – projects, coaching/training, benchmarking, expertise on demandSectors – technology, finance, voluntary sector, professional services, government, outsourcingSome highlights – Clean Business Cuisine, DERA/Qinetiq, Taskforce 2000, Investment Banking CCC’s, DTI Smart Award 2003 for PropheZy, DTI Foresight Challenge Award 1996 for Financial £aboratory

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Risk

Reward

Rethink

Restructure

Invest

Divest

LikelihoodCostIgnore

(avoid/eliminate, pool/share/transfer, mitigate/reduce, accept)

(enhance, keep, sell, forego)

Tactical

Strategic

Fundamental

Exploit

Emergency

3. Lookaheads & Likelihoods

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Action Plan

RiskControl

Financingof Risk

CostJustification

ContinuousLearning

Treatment

ContingencyPlanning

Typical Views of Risk in Industry

RiskAssessment

& Evaluation

Benchmarking Cost of RiskSharedDatabase

Measurement

Stakeholder

Characteristics ofthe Organisation

BusinessPolicies &Objectives

RiskManagementObjectives& Strategy

BusinessDrivers

Strategy

Classification

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Too Crushed to Govern

Cadbury, Greenbury, Hampel, Turnbull, Higgs, KonTrag, Sarbanes Oxley, …COSHH, H&S, …“Initiatives” – lots of paperTargets – lots of paperFinance – lots of paperRisk management – lots of paper

Need integrated performance measurement!

“The future will be better tomorrow.”

Dan Quayle

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Ris

k

Likelihood

shar

ehol

der

view

deb

tor

view

regu

lato

rvi

ew

activity-based cost analysis*& operational reliability

event-loss databases&

benchmarking*

enterprise risk/reward management systems*

mutual risk management*&

external/re-insurance

extreme value theory&

last resort

debt/equity requirements&

subordinated debt issues

Rew

ard

event frequency

Risk, Finance and Governance

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““Cost of retention fund interest, insurances, bonds and Cost of retention fund interest, insurances, bonds and

administration costs could equate to 3% of contract value”administration costs could equate to 3% of contract value”

Risk Management Costs

Retention, bonds and PI insurance 1.1%

3rd party insurance, works insurance 0.5%

Legal costs, administration, overheads

expert advice, time, work disruption,

duplication etc. say 1.6%

3.0%

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Risk Management Working Group

Risk Management

Sharing Knowledge DBF Risk Standards

Collaboration Mutual Insurer

Risk Acceptance

Current

Bulk-Buying Insurance

Operational

Project

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Effort

Scope

1. Information sharing for

internal funds

4. UK company or Lloyd’s syndicate

3. Captive insurance company or PCC or

ER/RM2. “Badged”

insurance

7. Capital markets solutions

6. Construction industry mutual

5. Be Mutual

Risk Management Working Group View

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Mutual(s) Benefits

Cost effective utilisation of insurance, expert resources and systems

Risk strategy developed without internal political pressures - avoids combining risk management role with other duties

Easy access to specialist expertise

Knowledge sharing

Industry gains

Share costs with other client users for future developments in risk management

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Shipping & Transportation Mutuals

Shipowners Protection & indemnity risks (mainly third party liabilities)

World's largest - one-fifth of the world's shipowners

Shipowners Costs of pursuing/ defending claims for uninsured amounts

World's largest - one-fifth of the market - 2000+ ships

Multimodal industry

Equipment and liability insurance

5000 companies worldwide - 70% of world container fleet

Ship agents, shipbrokers, ship managers,surveyors

Professional indemnity and public liabilities

World's largest - 1000+ members

GreekShipowners

Marine war risks including capture & seizure

80% of Greekowned ships

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Not Just Shipping

LawSIMIAMeridies, LawnetBar Mutual

Pension Fund Trustees

Patent Agents

Clinical Negligence Scheme for Trusts

Variants

PAMIA

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Property

SURMIA Surveyors’ Mutual

CERTA

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Obvious Issues

What risks are jointly shared BUT on which you do not compete?

Can these risks be assessed and managed (e.g. standards and certification schemes)?

Is there benefit in joint learning about risks?

Is there an industry benefit in perceived risk management/guarantees?

What is being pledged to the pool - equity, charges, promises?

Can the industry co-operate?

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Enterprise Risk/Reward Management Systems

Strategic risk valuation - holistic approach

Internal “insurance” unit, premia and claims management, but:

near misses

sharing best practice

Key performance target integrated into MIS

External comparators

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6. Securing and Scoring

Risk/RewardProfile

Risk/RewardManagement

UnitRisk

ProfileImprovement

Information Sharing

Results Risk

Assessments

Reward Management

Profit, Bonuses“insurance”

premia

Enterprise Risk/Reward

Management Systems

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Annual Cycle

Determine business unit premiums - linked to risk assessment and action planInform business units of deductible and methodology through self insurance agreementCollect premiaRecord and investigate any in-year claims, near miss records, etc.Pay out on verified losses (calls possible)Feed information into next year’s insurance system

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Typical Enterprise Risk/Reward Management

comparator

sharing best practice

claims

strategic risk valuation

premia

notificationsand investigations

Extern a l M arke ts In te rn al "Po o l"

R isk /Rew ard U n it

U n it A U n it B

O p era tio ns

O rg an isa tion

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Challenges for Property Organisations

Many layers of contracting

Aligning targets and remuneration

Looking at the system, not the incident

Picking a single risk to start with

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Operational Risk in Industry

Six Sigma ISO9000

Total Quality

ChecklistsProceduresInspection

Numerical targetsEngineeringAutomation

ContributionCommitmentCulture

Measure Manage

Motivate

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Sharing Information

Risk Management Working Group recommendation

Charity Insurance benchmark example

Other cost benchmarking

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Next Step?

Contact us for a

discussion on

radical improvement.

[email protected]

“Get a detailed grip on the big picture.”

Chao Kli Ning

“zest for enlightenment” z/yen limited risk/reward managers 5-7 st helen’s place london ec3a...

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