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Risk management an afterthought for many Brazilian firms: Speakers

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Risk management an afterthought for many Brazilian firms: Speakers

Rio de Janeiro — Despite several major disasters since 2000, including a deadly plane crash in Sao Paulo in 2007 and an oil rig collapse into the sea near Rio in 2001, many companies in Brazil still aren't practicing smart risk management and don't buy insurance to cover most of their risks, the head of the Brazilian Risk Management Association told the opening day audience Wednesday at ALARYS 2014, the biennial Latin American risk management conference.

“A lot of people don't even understand what risk management is within companies. What we are talking about is risk management of the entire enterprise,'' said Marcelo D'Alessandro, director of ABGR, the Brazilian risk managers' group and a veteran corporate risk manager.

Major players in the Brazilian commercial sector put investors first and remain unwilling to implement effective corporate risk management programs to try to mitigate significant operational risks, Mr. D'Alessandro said. And despite a law the largest nation in South America passed in 1966 mandating that companies buy insurance to cover most risks and liabilities, many firms ignore this decree, and when that occurs the government does little about it.

“CEOs will say we don't do insurance,'' said the veteran risk manager who also served on the committee that secured Rio as the host city for the 2016 Summer Olympics.

Mr. D'Alessandro cited several compelling examples of serious disasters across Brazil affecting the private and public sectors and used them to underscore his point that they have forced only minimal improvements in cohesive risk planning in many cases. He said after a disaster it becomes clear there's no insurance coverage in place and no foresight to become more resilient to head off similar disruptive events.

In addition to the plane crash and rig collapse, he mentioned a 2004 commuter train crash in a forest and the seven-year drought ending in 2007 that crippled nearly all of Brazil's primary hydroelectric power system.

“There's a lack of preparation for a problem, our traditional trademark in Brazil,'' he said. “We are always running after problems.''

However, a couple of risk managers from major corporations in Brazil explained that risk management is steadily improving, but much work remains because most firms have too few people working on risk planning.

Andrea Almeida, risk management director at Vale S.A. in Rio said during the past 10 years the diversified and multinational mining company had become a more risk-aware company, and that has helped the firm reach its corporate strategic objectives.

“We have managed to set risk objectives for the next five years all over the company,'' Ms. Almeida said. Our motto is that “the best spending of money is for risk reduction.''

The risk manager at Endesa Group, a leading electric utility in Brazil, said “the risk barometer is starting to come up in Brazil.''

Michelle Lyporage Miguel said Endesa actively monitors risks across the company and has proper coverage and risk transfer programs to protect the firm. She made the case that Endesa is one of the firms trying to lead others to embrace risk management.

“Risk management is the soul of the company,'' Ms. Miguel said. “It provides the continuity for our company.''

Meanwhile, the two-day ALARYS conference has a daylong agenda of panel discussions planned for Thursday, highlighting global insurance programs in Brazil and a presentation about captives led by officials from Bermuda, the host nation for the 2016 ALARYS conference.

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