An attitude change to risk management is urgently required if businesses and societies are to work towards a sustainable future, said experts at the recent International Risk Management Conference held in Langkawi, organised jointly by the Malaysian Association of Risk and Insurance Management (MARIM) and the Universiti Utara Malaysia (UUM).
“It won’t happen to us” mindset needs to go
Citing the recent Kelantan floods, keynote speaker Professor Dr Mohd Rasid Husin highlighted it as an example of a “basic risk management” oversight, coupled with what he termed an “Attitudinal-Problem Syndrome”. He said: “The Kelantan disaster came as a form of surprise, albeit an unpleasant one. While it was expected to be a normal monsoon season with a predictable level of rainfall, the expected turned into an unexpected risk, which resulted in an unwanted crisis that paralysed the entire state.”
Dr Rasid noted that “communities worldwide, and Malaysians being no exception, tend to forget history either consciously or subconsciously” – an illustration of the still-prevalent mindset that “it won’t happen to me/us”. The sentiment was shared by panellists who discussed the current landscape and future expectations.
Professor Dr Zulkifli Yusop, Dean of Research at the Institute of Environmental & Water Resource Management (IPASA), UTM Skudai, said people tend to forget history, and regarded the occurrence of floods as a “recreational” one when in fact floods in Malaysia’s east coast have been happening more frequently. He mentioned that the issue of preparedness for worst-case scenarios was something that communities are lacking in, and therefore needs concerted efforts for improvement.
Current risk landscape
Turning to the current risk landscape in the region, the panel noted that risk managers are in a dilemma. A traditional risk like communication risk – with technology’s enablement – has evolved and re-emerged with implications to reputation and security risks via social media and cloud services respectively.
“Water” is top risk for Malaysia
Particularly for Malaysia, MARIM Chairman and Telekom Malaysia’s Chief Procurement Officer Mohamad Mohamad Zain and Dr Yusop both noted that “water” risk will be a key, if not top risk for the country. “While Malaysia used to be considered a low-risk area in terms of natural disasters, this is now changing. Floods are going to be a number one natural disaster risk for Malaysia.” The water risk includes a water shortage crisis as well due to the uneven distribution of water in the country, added Dr Yusop.
Another risk discussed during the session was terrorism risk, which Allianz SE Regional Chief Underwriting Officer Chris Dee said tends to fluctuate on the insurer’s proprietary risk barometer. While previous terrorist events had major repercussions, he noted however, that the current terrorism risk faced in Syria is different. Terrorism risk now, he said, is “dissipating into smaller groups, but with possibly wider and smaller impacts”.
Align with risk management strategies to ensure sustainability
Nonetheless, Dr Rasid noted companies and organisations are coming to realise that the management of economic, environmental, social and governance issues can have a positive effect on their core businesses, such as improvements to cost of capital, profitability and supply chain risk issues amongst others.
“However, the key to producing bottom-line improvement is to align and integrate these economic, environmental, social and governance efforts with risk management strategies,” he said.
Asia Insurance Review was the official media partner for the MARIM International Risk Management Conference 2015.