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ARC: HOW TO CONTEND WITH EMERGING RISKS AS THE ECONOMY CONTINUES TO RECOVER

ERM techniques can reduce the risks of working in emerging markets

Enterprise Risk Management

Enterprise risk management can help address the challenges of working in emerging markets.

“There's a great connectivity between emerging markets and what (enterprise risk management) is capable of,” said Christopher E. Mandel, senior vice president of strategic solutions at Sedgwick Claims Management Services Inc. in Memphis, Tenn. He made the comments during a panel discussion on emerging markets during the Business Insurance Risk Management Summit.

In many cases, risk mitigation strategies, including exercising due diligence and hiring local advisers, do not involve insurance.

“There's specific things, starting with risk identification, that allow us to go beyond what's insurable ... and ask questions about what matters most and, therefore, get ahead of the curve,” Mr. Mandel said.

“What you also get when you approach it this way is the ability to understand” risk profiles and how they change when a company moves into a new sector. “Ultimately, (enterprise risk management) leads to better decision-making. At the end of the day, if you connect the dots between risk and strategy, it can help you avoid the things you really need to avoid, including going into a country ... that may not make sense,” Mr. Mandel said.

When the panelists were asked what countries kept them up at night and why, J.P. Fowler, Chicago-based executive vice president and head of customer relationship management for Zurich Global Corporate in North America, said countries such as Russia that have “national competitors who are fierce in protecting their turf” are challenging, because companies want to do well, “but not at the expense of ethics.”

“One of the things that's mystifying to me is why the euro's maintaining the value it has, given what's going on,” said Daniel Wagner, managing director of Norwalk, Conn.-based Country Risk Solutions.

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He also questioned the yen's recent strength, saying the foreign exchange market “doesn't make much sense to me at all.”

Mr. Wagner said he was worried about the economic situation in Europe, which is leading to an increase in far right and fringe groups, has caused a “brain drain among young people” and resulted in smaller tax bases.

“Europe is in a very serious situation, and I don't see it getting any better anytime soon,” Mr. Wagner said.

Also speaking at the session was Richard J. Coyle, executive director of the Emerging Markets Institute at the Samuel Curtis Johnson Graduate School of Management at Cornell University in Ithaca, N.Y.

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