Risk management in the Middle East is slowly gaining more attention, as evidenced by the growing number of events like the World Risk 2015 Conference in Dubai, which discussed ERM and threats unique to the region.
The practice of risk management in the Middle East, particularly ERM, has traditionally been seen as lagging behind the rest of the world’s. However, this seems to be slowly changing, as demonstrated during the second annual World Risk Conference.
Opening the conference, HE Saeed Mohammed Al Tayer, MD and CEO of Dubai Electricity and Water Authority (DEWA) said: "Developing risk management plans has become crucial in enterprise strategic planning, as it helps to deal with risks and emergencies, effectively and efficiently, and avoids negative impact on the organisation's performance. Through this conference, we will work to raise standards of risk management strategies, and apply the methodology in an integrated manner that will identify risks that could affect financial, operational, strategic, environmental, and health and safety aspects, and develop preventative plans.”
The devil is in the details
Echoing a line in Mr Al Tayer's introduction that the biggest risk is not risking anything was Mr Felix Baumgartner, the first keynote speaker and stuntman, who is also the first man to break the speed of sound without the protection or propulsion of a vehicle.
Offering an original take on risk management – “in business you can lose all and be bankrupt and still start from zero, but I always bet my life” – Mr Baumgartner highlighted the importance of good preparation to have confidence, while seeking the fine balance between being an optimist and being a realist in assessing what was achievable. He said that one could not take for granted that what worked the first time would work again the next time, as one would be exposed to the same risks all over again. Mr Baumgartner also noted that small risks are the ones which “kill us” most of the time as details were critical, and should not be overlooked.
Using the examples of nuclear accidents and the global financial crisis, economist and journalist Tim Harford talked about how a series of measures intended to provide safety and risk compensation to both complex power and financial systems had eventually provided a new way for things to go wrong. It is thus important to provide a way for adequate information and clear indicators to be supplied to prevent such occurrences. Mr Harford said that prior to a negative incident like fraud, there was typically someone who knew about the problem but did not speak about it. Thus, having an adequate whistleblowing channel would provide a way for them to report it.
Emerging risks for the region
A panel on risks and risk management in the Gulf observed certain trends such as the rise in ERM awareness and the number of risk professionals in the region. It also noted that while companies from the West brought risk management expertise, they had to adapt their practices to fit the local culture and different risk appetites, which they encountered with the large number of family businesses in the Gulf.
Mr Mete Kasim Birecikli, Business Continuity Management Coordinator, Corporate Planning Group, Qatargas, said the key risks faced in the region included its vulnerability to low oil prices and ensuing cost-cutting practices, resulting in the loss of talent; and rising cyber attacks. Mr Scott Saunders, Head of Risk, Qatar Foundation said that business continuity management was still an issue, given the prevalence of major construction projects in the Gulf.
Meanwhile, Mr Andy King, Head of Forensic Accounting & Claims EMEA, Aon, noted that the traditionally heavy involvement of regional governments in subsidising infrastructure and living expenses also meant that their reserves and governance operations were vulnerable in the event of a major energy crisis. Sectarian and religious issues in less-stable states also present political risk, as observed by Mr Domenic Antonucci, CRO for Red Sea Housing.
However, vulnerabilities also present opportunities. For example, companies which are directly or indirectly affected by the current oil price plunge could be prompted to diversify their interests, said Mr Antonucci. He also expressed his wish that the concept of having risk directors would take off and that there could be a better organisation of risk management expertise and better representation of the profession. Mr Saunders said he expected that in time to come, risk management would have greater visibility at the board level and would be embedded in companies’ strategic decision-making processes.
Promoting ERM in the Middle East
During the conference, Mr Al Tayer received the ISO 31000 certificate from the British Standards Institution on behalf of DEWA for building a risk management system according to ISO 31000 requirements.
The conference discussed cyber risks, risk maturity, ISO 31000 and quantitative ERM measures. It was attended by participants from Dubai-based public and private organisations, and organised by DEWA in partnership with the London-headquartered Institute of Risk Management.