2. 1 Agenda  Initial questions  Understanding alignment  Case studies – the impact of misalignment

3. 2 Who would you vote for in the forthcoming US election?  Donald Trump  Hilary Clinton  Bernie Sanders  Kayne West  Homer Simpson

4. 3 Should the United Kingdom remain a member of the European Union or leave the European Union?  Remain  Leave  Undecided

5. 4 To what extent will the outcome of Brexit affect your corporate strategy?  Not at all  A little  Moderately  Extensively  Your guess is as good as mine.

6. 5 To what extent will the outcome of Brexit affect your risk management strategy?  Not at all  A little  Moderately  Extensively  Your guess is as good as mine.

7. 6 We all assume your corporate strategy and risk management strategy should be aligned – does it matter? 1.Yes they should be and yes it matters 2.Yes they should be, but it doesn’t make much difference 3.Yes they should be, but it doesn’t matter and it doesn’t make any difference 4.They don’t need to be aligned, so no it doesn’t matter 5.No and no it doesn’t matter – I’m in the wrong workshop – so I’m off to the bar 20% EdiVoteStartEdiVoteStop -200 0 Standard

8. 7 How do you know whether your Corporate and Risk Management strategies are aligned? 1.Because we have evidence that our Corporate Strategy is succeeding and that we are a resilient organisation 2.Because we think that our Corporate strategy is succeeding and we have a good risk management strategy 3.Our risk management process – risk registers and risk maps – indicate that we were aligned last time we looked a year ago 4.We guess that they are as we all use the same language. 5.I don’t know and don’t care – mine’s a double 20% EdiVoteStartEdiVoteStop -200 0 Standard

9. 8 What about your insurance strategy – does that have any relevance here at all ? 1.No – our insurance strategy should standalone 2.Yes – but our insurance strategy has developed separately from our Corporate and Risk management strategies, so there is no real alignment 3.Maybe – but we have no idea how to bring those areas together 4.Maybe – but the board doesn’t have any interest in the insurance programme (except for the D&O) 5.I’m back the bar wasn’t open – I know something about insurance 20% EdiVoteStartEdiVoteStop -200 0 Standard

10. 9 What evidence would you see or could you point to if you are a Risk Manager and you think your Corporate, Risk and Insurance strategies are aligned? 1.Resilience in response to a major crisis 2.Successful merger process 3.Insurance claims quickly and fairly settled 4.Risk and insurance strategies signed-off by the Board and Audit Committee 5.Risk identification, evaluation and management processes truly embedded in the operational management of the business 6.All of the above 16% EdiVoteStartEdiVoteStop -200 0 Standard

11. 10 Reflections? “ We do not learn from experience. We learn from reflecting on experience” John Dewey

12. 11 Understanding Alignment “The true value of insurance is often only recognised as a consequence of a major loss. At other times, insurance can be viewed by boards and business units as just another cost overhead, where value is judged by securing the lowest premium. As a result, insurance can be unfit for purpose and when losses occur, may fail to meet the expectations of the organisation.” 1 1. Business-critical Insurance : Identifying those insurances that support the business and its strategy. AIRMIC Guide 2015

13. 12 Understanding Alignment

14. 13 Components of Alignment

15. 14 Alignment ‘Drift’

16. 15 Practical Approaches  Assessment of financial materiality  Capital modelling  Emerging risk assessment  Benchmarking  Scenario testing  Risk mapping & evaluation  Resilience assessment  Leveraging data Others?

17. 16 Scenario 1 - Acquisition You are the Head of Insurable Risk for a publicly listed global firm that manufactures chemicals that have a variety of end uses including consumer cleaning, beauty products, industrial coatings and as petrochemical additives to enhance performance. Your firm has manufacturing operations in 15 territories and distributes to over 60 countries. Manufacturing sites are based in the US, South America, West Africa, China and Australia. Your firm has been actively seeking growth and has made several small acquisitions over the last few years. It has just announced the completion of the acquisition of the industrial chemicals division of a large privately owned firm with operations across Eastern Europe. The business division concerned conducts very similar activities, supplying predominantly into local markets. This acquisition is by far the largest of all those completed and represents a significant expansion of geographical footprint. Your firm has a mature risk management strategy, with a Chief Risk Officer having board level responsibility for risk. As Head of Insurable risk you have responsibility for ensuring the insurance purchasing strategy provides cost effective protection for the business. You are also required to assist the CRO in the design and execution of the Risk Management strategy. The company has always taken a conservative approach to risk. You have been asked by the CRO to provide a short report on the integration of this most recent acquisition into the Risk Management Strategy and insurable risk programme. As Head of Insurable Risk, consider how you would respond to this request in the following scenarios: 1 – where corporate, insurance and risk strategies have been aligned 2 – where corporate, insurance and risk strategies are not aligned

18. 17 Scenario 2 – Corporate Crisis You are the Head of Risk and Insurance for a UK based retailer specialising in consumer electronics. The company is owned by PE investors following a financial re-structure four years previously. The firms primary investors are known to follow a 5-6 year turnaround and sale strategy. Your firm has both direct retail and online sales channels. Your firm has been embarking on an aggressive growth strategy, driven by international acquisitions coupled with high levels of marketing to develop brand awareness and customer loyalty. Growth has been financed through cash resources. The key pillar of this campaign has been a commitment to providing best technical advice at prices that match all available online offers. Your firm has ben steadily expanding it’s ability to fulfil international online orders using outsourced distribution. Online orders are now accepted from within the EU and the USA. You are made aware of a possible security breach and loss of customer data at 4:30pm on Friday. Early indications from your CIO and CRO are that this could be as a result of a malicious attack by a third party. Although the full extent is unknown, as many as 5 million customer records may have been compromised. It is unclear whether this breach has occurred within your firms own systems or via a TP provider used to process online payments. The breach is being discussed on social media and your CEO has been contacted by national media for comment. You are about to attend a crisis meeting and have been asked to provide details of the firms crisis response strategy and any insurance protection together with a summary of the steps the company needs to take immediately to manage this crisis from a risk and insurance perspective. Please consider how this scenario could play out in two scenarios: 1 – where corporate and risk strategies have been aligned 2 – where corporate and risk strategies are not aligned

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