Eveline Loza
Automotive Vice President
Marsh
/
Insight

Three-Dimensional Approach to Superior Risk Management

Tue, 09/01/2015 - 15:31

Economic uncertainty, disruptions in supply chains, fluctuations in the prices of raw materials, cyber security, regulatory changes, terrorism, and rising health care costs all pose unique challenges for business leaders. Managing risk effectively is not just about having the right insurance policy, but also consists of creating opportunities for cost control, freeing up capital and, ultimately, promoting sustainable growth. This risk management approach stems from over 30 years of constant innovation, recently accelerated by techniques and tools that arrived after the advent of Big Data and Analytics. However, even with today’s technology, for a risk management program to be effective, it is essential to begin with a basic principle: understanding. The answer is to thoroughly understand business goals, risk tolerance, and the balance between assured risk and working capital, as these are the real factors affecting the company.

Even though car insurance is not mandatory in Mexico, it is important that the insurance culture penetrates deeper and that the number of specialized consultants in the industry increases. For the automotive market, car accidents represent a significant impact to the economy, society, and to families, particularly when loss of life and medical and legal expenses are concerned. As a result, it is vital to create and promote a culture of accident prevention in this growing automotive industry. A significant part of an insurance broker’s value proposition lies in not only in acting as an intermediary between companies and insurers, but also in being a specialized consultant. In the case of the automotive market, it is important to raise consumer awareness about the social benefits that insurance brings. It is also necessary to complement this with a wide range of products that allow drivers and owners the choice of how to protect themselves and their vehicles.

This is where Marsh’s 3D methodology comes into play. The fundamental purpose of the Marsh 3D model is to maximize the ROI in risk management through increased efficiency, improved decision making, and a reduction in costs. 3D stands for Define, Design and Deliver, and is an approach to accident analysis that helps to reduce the frequency and severity of claims. The first step of this method is to build understanding, which is achieved by analyzing risk management strategies against a company’s business priorities. At this stage, not only are the traditionally insurable risks identified, but so too are non-insurable risks, such as operational and strategic threats. Once identified and prioritized, critical risks progress to the second step, where strategies are selected to design an implementation plan. The third step is when this thoughtful analysis and planning is rewarded, as the customer ends up with a detailed and enforceable plan, as well as receiving expert advice on creating optimal risk management.

By focusing first on the business objectives, the dynamism of the automotive industry, and the risk profile of each company, this integral risk management solution also extends to the protection of the companies from unwanted risks. It aligns risk management with the strategic growth objectives of each company, integrates risk management in the financial and operational model, and maximizes the value of investment in risk management. Above all, this support is focused on finding the opportunities hidden within a company’s fleet management approach, or in the insurance program held by its agencies or investors. Ultimately, the main objective is always to generate an attractive offer for customers, in terms of pricing and competitive conditions within insurance policies, which in turn generates advantages for OEMs as a mutually beneficial relationship with Marsh.