The latest economic research reaffirms Asia-Pacific’s position as the growth engine of the global economy. While being cautiously optimistic about the region, Mr Marc Archambault of SCOR Global Life Asia-Pacific says that the VUCA (Volatility, Uncertainty, Complexity and Ambiguity) embedded in the current economic environment have led to a fifth element to consider: Vulnerability.
2015 has almost come to an end. The global economy has been heavily influenced by a few key developments in the first nine months of this year: sustained decline in world oil prices, rapid dollar appreciation and speculative hard landing in China, to name but a few.
Ironically, research from institutions such as the International Monetary Fund, the World Bank and the Asia Development Bank suggests that Asia-Pacific is set to benefit from this turmoil and reaffirms Asia-Pacific’s economic outlook over the medium term.
Economic growth is strongly influenced by demographic trends
The optimistic economic outlook for Asia-Pacific is based on various assumptions, in particular, the expected continued demographic growth in the region.
For example, Asia-Pacific accounts for more than 50% of the world’s population and is projected to be the second largest contributor to future global population growth behind Africa. Asia-Pacific has the largest high net worth population when compared to the other regions of the world and is expected to represent more than 50% of the world’s middle class by 2020. It is also projected that an additional five hundred million people will be moving to the cities by 2020, a trend which in turn will have a significant impact on the environment and place an extra burden on healthcare systems.
Population ageing is another social trend to be addressed, together with its associated consequences on retirement, healthcare and long-term care needs. These demographic trends will definitely have a substantial impact on the economy of our region for decades to come.
Current demographic trends can obviously be altered in the future by policymakers’ political decisions and policy executions. A classic example is the one-child policy that was introduced in 1978 in China, a policy which considerably changed the country’s projected population structure at the time.
Along with volatility in the world economy, uncertainty over demographic trends, and the complexity and ambiguity that resulted from balancing economic development and environmental protection, the current environment also brings vulnerability to the global economy.
Vulnerability is the birthplace of innovation, creativity and change
“Vulnerability is the birthplace of innovation, creativity and change.”
This is a quote from Dr Brené Brown, a research professor at the University of Houston Graduate College of Social Work.
In one of Dr Brown’s number one New York Times bestsellers, Daring Greatly, she suggested the following:
“To reignite creativity, innovation, and learning, leaders must re-humanize education and work. This means understanding how scarcity is affecting the way we lead and work, learning how to engage with vulnerability, and recognizing and combating shame. Make no mistake: honest conversation about vulnerability and shame are disruptive”.
Dr Brown’s research was originally intended to be human-centric in order to facilitate her social work research. Nonetheless, her research was subsequently noticed by the commercial world, and in recent years has been widely applied to day-to-day management.
One could argue that Dr Brown’s research has always been a natural fit for the business world, due to the constantly growing importance of the human factor in the business environment, the growth of the services industry and the need for innovation.
After Dr Brown made her landmark speech “The Power of Vulnerability” in 2010, which was viewed millions of times, people asked her to speak without fully understanding or respecting her research, and some people even attacked her personally. This meant that she was regularly put under pressure and made to feel vulnerable, and needed to consistently combat her own fear of vulnerability. That in turn led her to re-humanizes herself and her work, and also to become more creative and innovative. For example, one of the key reasons she researched and wrote Daring Greatly was to address the demands emanating from the business world, something she had not done up to that point.
Any corporation with high ambitions operating in such a competitive, demanding and VUCA (Volatile, Uncertain, Complex and Ambiguous) environment as ours needs to confront its own vulnerability head on by being innovative and creative, and by embracing change.
Reinsurance – Asia-Pacific comes into its own
In the Life reinsurance world, Asia-Pacific represents one-third of the global new business available on a yearly basis; this business is growing at a rate of 15% per annum while the available business in the rest of the world is growing at a low single-digit rate. This strong regional growth comes from Asia-Pacific’s previously mentioned economic and demographic trends.
In terms of macro environment, four of the world’s top-five freest economies (Australia, Hong Kong, New Zealand
and Singapore) can be found in Asia-Pacific; four of the top-five “ease of doing business” economies can also be found in the region (Hong Kong, New Zealand, Singapore and South Korea). In terms of opportunities, operational efficiency and many other aspects, Asia-Pacific has really come into its own in recent years. From this point of view, as a reinsurance company, it is a straightforward exercise to build a business case for an Asia-Pacific
Full service model necessary to meet clients’ expectations
It is worth mentioning that the Asia-Pacific reinsurance market has evolved dramatically over the years. Several years ago, complacency could be an acceptable operating model as competition remained relatively mild. More recently, being enthusiastic and diligent might have been sufficient to generate a decent amount of business.
Today, ambition, commitment, agility, creativity, responsiveness and a full service model are necessary to meet clients’ expectations. The region’s positive economic and demographic trends and overall attractiveness have created a crowded competitive landscape – multinational reinsurers are defending their positions and expanding; insurers are setting up reinsurance arms; local reinsurers have strong presence in their home markets and are expanding in the region. What is needed in order to participate effectively in this competitive environment?
Identify and leverage vulnerability
You need to dare, and dare greatly, to identify and leverage vulnerability in your organisation.
Let’s take SCOR Global Life Asia-Pacific as an example. Building on the solid foundations created by the SCOR Group’s four consistent strategic cornerstones (Strong Franchise, High Diversification, Robust Capital Shield and Controlled Risk Appetite), SCOR Global Life Asia-Pacific has launched a series of new initiatives over the last couple of years designed to maximise potential in Asia-Pacific.
The process involves challenging ourselves, identifying potential vulnerabilities and making enhancements to our service model in order to facilitate agility, creativity and responsiveness. These initiatives have resulted in a series of client engagements including product innovations, new distribution models, highly tailored financial solutions arrangements, and more.
Exercises like these can sometimes be disruptive, as they disturb the old and comfortable ways and structures, and must of course be handled with care. However, as we have seen, the rewards can be significant.
Organisations spend billions of dollars to identify areas for improvement and to define plans that will address these areas. The competitive, regulatory and reporting environment pushes you to do the same. It is a matter of when and to what extent you want to address these issues. I believe that the sooner you perform this exercise and re-humanize your organisation, the more freedom you will have to stimulate change, to create and to innovate, and the greater the success of your organisation will be.
Mr Marc Archambault is the CEO of SCOR Global Life Asia-Pacific.