Roads to Resilience

and its customers. For example, the day after hurricane Sandy struck in 2012, a ‘cash response’ team was in the field and in contact with the field inspectors. Although some risks are relatively low probability and high severity, most of Zurich’s business is very predictable and there is also considerable consistency in customers’ needs across markets, leading to similar value propositions with well understood risk profiles. Risk management does not stop with contingency plans: “ The foundation of decision making in Zurich is very strict economic principles … we look at everything on a risk adjusted basis ” (CEO Global Life). To support this, Zurich has a process called ‘Total Risk Profiling’ (TRP) which is used for all investment decisions, whether it is related to a product, a market, a region, or even an IT project. TRP considers the internal and external factors that can affect the outturn and the mitigation actions that can reduce the risk to an acceptable level. It consists of five or six very standard common practices that each unit uses. For major investments, TRP reports are fed up to the group executive committee and the overall company TRP is reviewed by the Board of Directors. One practice that increases Zurich’s resilience is that as an “ extremely thoughtful company ” (Head of Sales, Distribution and Marketing Global Corporate General Insurance), a considerable amount of research is done prior to entering new markets. This considered approach has meant Zurich has survived the turmoil of the last four to five years better than most of its competitors. Scenario analysis is ‘ingrained in the insurance business’ and Zurich is using stochastic analyses continuously to look at thousands of potential outcomes from investment scenarios, with the primary aim of achieving sustainability. The company will withdraw from lines of business that do not look sustainable in the long term. It also models worst case scenarios, which are several extreme events in a short time period. Another form of risk analysis is the International Advisory Panel of experts that considers the future economic and geopolitical issues across the regions. The current horizon for both is 2020. “ For every risk of any nature, we’ve got someone looking at it, researching it and ensuring that the organisation is fully aware of it. ” (Chief Risk Officer General Insurance). In the Airmic Roads to Ruin report, it was found that companies that experienced problems had a ‘glass ceiling’ hindering the flow of information to the board. At Zurich, this problem is avoided by a number of approaches. For instance, the philosophy of ‘management by walking about’ is an integral part of the way resilience is built into the day-to-day behaviours across the organisation. “ I spend one or two days a month at our (operational) locations; I either do a customer event or broker event, but spend half a day to walk the floor, coffee sessions, meet people and get an understanding of business at the coal face … listening and answering questions … it is an opportunity to connect the top to the bottom of the organisation – it is about having a real rapport and connectivity with the people that ultimately represent our business ” (CEO UK General Insurance). “ You’ve got to have the right combination of control frameworks in place coupled with the right people capabilities and a culture that’s prepared to be open and transparent. The mantra I use is when you identify an issue, flag it up the line first and handle it second … It has got to start at the top of the organisation, with supportive language that shows we are more interested in how we learn and move forward than holding an individual accountable ” (CEO UK General Insurance). Leadership and governance

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Roads to Resilience: Building dynamic approaches to risk to achieve future success