Page 1 Recording of this session via any media type is strictly prohibited. Page 1 ERM A tool for enhancing development in emerging countries

Page 2 Recording of this session via any media type is strictly prohibited. Luis Guillermo Gutierrez Enterprise Risk Manager, Suramericana S.A. President of the Colombian Actuarial Association from 2011 to Teacher of undergraduate and graduate classes at different universities. Master's degree in Actuarial Science granted by the University of Nebraska at Lincoln, USA. Luis Felipe Villegas Enterprise Risk Manager, Suramericana S.A. Risk manager with more than eight years of experience. CBCP by DRII, GRCP by OCEG, AIRM by Alarys and CPAR – ALDFT by FIBA

Page 3 Recording of this session via any media type is strictly prohibited. Take a closer look at how organizations operating in emerging markets could identify risks in a holistic way and how to evaluate these risks (transferable or not) through the use of quantification techniques leveraged with qualitative aspects of risk management. Also find out how ERM as an input of the strategic planning of the firm, helps to prioritize its initiatives which are materialized trough projects and processes’ improvements in order to optimize its resources, to increase its value; and lastly, to contribute to the development of the country where it operates What to expect

Page 4 Recording of this session via any media type is strictly prohibited. I. About Suramericana S.A.

Page 5 Recording of this session via any media type is strictly prohibited. I. About Suramericana S.A. Suramericana is a Holding Company that handles investments in the insurance and social security sectors. Suramericana’s corporate purpose is to fully satisfy the community's needs with regard to security and savings, with products such as life and general insurance, Workers Comp and healthcare. Insurers also have risks We are the Enterprise Risk Managers of the insurance companies You could imagine how hard it is to tell a group of people that handle other people’s risks, that they have to manage their own risks.

Page 6 Recording of this session via any media type is strictly prohibited. Sofia Vergara Late Show with David Letterman December 21, Let’s talk about Colombia

Page 7 Recording of this session via any media type is strictly prohibited. An emerging market is a phenomena that is not fully described by or constrained to a geography or economic strength. Similarities & Differences with developed markets Financial stability Bureaucracies Distribution problems Corruption Elevated economic growth rates Higher expected returns Low correlation with developed markets II. Emerging Markets (EM)

Page 8 Recording of this session via any media type is strictly prohibited. Intuitively, managers know that operating a business in an emerging market is different from doing so in a developed economy, but risks and opportunities in these markets are usually over/under stated. Then, granular understanding of risk structures is key Typical and not so typical risks in EM II. Emerging Markets (EM)

Page 9 Recording of this session via any media type is strictly prohibited. Typical and not so typical risks in EM Panorama BMI Subsidiaries - Colombia Political risk Economical risk Business environment Risk Indicators The risk rating score is between 0 and 100, where 100 is the top with the most stable situation. Source: Business Monitor International II. Emerging Markets (EM)

Page 10 Recording of this session via any media type is strictly prohibited. Managers often overlook the ways in which emerging markets operate differently than developed economies. Challenges & Oportunities when developing ERM strategies in E.M. II. Emerging Markets (EM) Source: The Global Competitiveness Report

Page 11 Recording of this session via any media type is strictly prohibited. Not every company is in the stock market (Especially in EM Countries), so how do we value risk? Using simple quantification methods to evaluate risk. Establishing strategies and goals for an optimum balance among growth, performance and risks. III. Applying simple approaches to risk valuation

Page 12 Recording of this session via any media type is strictly prohibited. Aproximately 2,800 Companies are listed on the New York Stock Exchange Aproximately 75 Companies are listed on the Colombian Stock Exchange III. Applying simple approaches to risk valuation stock

Page 13 Recording of this session via any media type is strictly prohibited. III. Applying simple approaches to risk valuation

Page 14 Recording of this session via any media type is strictly prohibited. III. Applying simple approaches to risk valuation

Page 15 Recording of this session via any media type is strictly prohibited. Valuation Strategic decisions Products, channels, markets [Risk universe] Tactical decisions Risk Behavior Change in Company’s Value Risk Treatment Risk Appetite Economic Model inflation Interest rates stock market growth Unemployment Administrative Decisions Strategic Planning Insurance Market: Capacity Market Reinsurance Strategy Competitors Regulatory Framework III. Applying simple approaches to risk valuation

Page 16 Recording of this session via any media type is strictly prohibited. III. Applying simple approaches to risk valuation

Page 17 Recording of this session via any media type is strictly prohibited. Establishing strategies and goals for an optimum balance among growth, performance and risks. 2 1 Risk Performance Growth Capital 3 III. Applying simple approaches to risk valuation

Page 18 Recording of this session via any media type is strictly prohibited. ERM focuses on avoiding downside scenarios while exploiting potentially profitable risks, but ERM is not always “aware” of the granular details of the strategy. SRM focuses on a vision of an ideal future state based on strategy, which is great complement on emerging markets scenarios. IV. From ERM to SRM. What’s the path?

Page 19 Recording of this session via any media type is strictly prohibited. Applying risk identification and valuation on your tactictal and strategic planning. Prioritizing your projects and processes interventions based on SRM IV. From ERM to SRM. What’s the path?

Page 20 Recording of this session via any media type is strictly prohibited. Applying risk identification and valuation on your tactical and strategic planning IV. From ERM to SRM. What’s the path?

Page 21 Recording of this session via any media type is strictly prohibited. Prioritizing your projects and processes intervention based on SRM IV. From ERM to SRM. What’s the path?

Page 22 Recording of this session via any media type is strictly prohibited. $ Strategic planning process Tactical planning process Budgeting process Strategic plan Model Tactical plan Model Budget A IV. From ERM to SRM. What’s the path?

Page 23 Recording of this session via any media type is strictly prohibited. Prioritizing your projects and processes interventions based on SRM IV. From ERM to SRM. What’s the path?

Page 24 Recording of this session via any media type is strictly prohibited. V. Enhancing sustainability through SRM Company’s sustainability + supply chain’s sustainability = Country’s sustainability Personal consumption Factors incomes (wages, interest, profit and rent) Consumer goods and services Factors of production (labor, capital and natural resources) Firms Households Developed Countries Emerging Countries

Page 25 Recording of this session via any media type is strictly prohibited. V. Enhancing sustainability through SRM Company’s sustainability + supply chain’s sustainability = Country’s sustainability December 2013

Page 26 Recording of this session via any media type is strictly prohibited. Not every market is the same, different risks emerge. The stock market will not always be there as a reference for risk management. ERM and SRM are both needed. Granular understanding of risk structures is key Risk management is fundamental to thrive in an emerging market. Companies have a very relevant rol in emerging markets Countries’ sustainability. VI. Summary

Page 27 Recording of this session via any media type is strictly prohibited.

Page 28 Recording of this session via any media type is strictly prohibited. Please complete the session survey on the RIMS14 mobile application.