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ENTERPRISE

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IRF presidentINSURANCE

INDUSTRY INSIGHT2010 challenges2010 challengesCASE STUDY: Alan Hutcheson CEO ofTrackergives an insight into how the

companys disaster recovery plan was put to the test

VOLUME 4 N 1 FEBRUARY 2010


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HOT SEAT

4 Tracker fire a case study

GENERAL INSURANCE

10 Brokers corner. Preparing to document theRM plan. By Johann Maree

12 Industry insight. Succeeding in a drastcallytransformed insurance sector

SHORT TERM

14 Industry insight. 2010 challenges andopportunites

20 Product recall. Beware the CPA. By KeithMarshall

LONG TERM

22 Industry insight. Lessons from the past,priorites for the future

I N I D FEBRUARY 10

Coverconcept

anddesign:FrdrickDanton

EMPLOYEE BENEFITS

25 Disabled employees. Reasonable accommodaton in theworkplace. By Anton Engelbrecht

26 Retrement RA season. Lump sum RA contributonsfor tax benefits

30 EB in an economic downturn. The risk of not havingemployee benefits. By Taryn Marcus

RISK MANAGEMENT

31 Specialised risk management disciplines. Integratngspecialised risks in ERM. By Vanessa Payne

EXECUTIVE SECTION34 SAICA Annual Financial Services Conference

ASSOCIATION PAGES

36 IRF Taking the retrement industry into the future37 FIA welcomes new CEO

MARKET NEWS

40 Green buildings. Re-energisingtred assets to reduceoperatng costs

40 Sixth annual Top Women Empowerment Awards

REGULARS & EXECUTIVE SECTION

3 Editors note38 Subscribe


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2010 Challengesand opportunities

EDITORS NOTE

The hot seat of this issue ofEn-terprise Risk deals with a fascinating real

time case study entitled Rising from theashes. During the early hours of Saturday

17 January 2009, the Tracker head office in

Darrenwood, Johannesburg was gutted by

a fire that ripped through the building. Ac-

cording to Andre Ackerman, Trackers CFO,

the disaster recovery plan (DRP) was ex-

ecuted with military precision, enabling the

company to carry on with their business of

recovering vehicles. They took their first call

just five hours after the disaster. The entire

administrative staff was fully operational at

an off-site location by Monday morning.

The case study looks at the vital role that

each of the parties played in the implemen-

tation of the plan. The client was Tracker,

the disaster recovery site and service pro-

vider was IBM, the insurance broker was

Alexander Forbes Risk Management Serv-

ices, the insurer was Mutual & Federal and

the loss adjuster was Cunningham Lindsey

South Africa. The damage was estimated at

some R40 million, but the DRP ensured that

not even a fire could prevent Tracker cus-

tomers and staff from taking back tomor-

row. A story well worth reading.

Enterprise Risk starts the year 2010 with

two industry-insight articles that give the

views and opinions of the leaders in the

short- and long-term sectors. Each focuses

on the lessons learned from 2009, and the

challenges and opportunities that lie aheadfor the upcoming year. While 2009 was most

certainly a difficult time for the industry,

there are undoubtedly many opportunities

for those willing to take the initiative. The

one word that just about every leader men-

tioned as being a key priority is customer.

As a result, the levels of customer servicewill rise even further.

In the last quarter of 2009, I took over the

editorship ofEnterprise Risk when Sandra

Jordaan left. This was intended to be for

the period while a replacement was being

found. I am pleased to let you know that

we have now appointed an editor forEn-

terprise Risk. Bronwyn Barnard, who cur-

rently edits Emergency Services SA and

Occupational Risk for 3S Media, will be

taking over from me with effect from the

next issue, with Monique Terrazas continu-

ing as assistant editor. I wish the team all

the best for taking this growing magazine

to even greater heights in this remarkable

year of 2010. I would also like to thank the

industry for their support.

Editor

ENTERPRISE

ENTERPRISE RISKFeb10

PUBLISHER Elizabeth Shorten

EDITOR Debbie Besseling

ASSISTANT EDITOR Monique Terrazas

CREATIVE DIRECTOR Frdrick Danton

CONTRIBUTORS Johann Maree, Keith Marshall, Anton

Engelbrecht, Taryn Marcus, Vanessa Payne

CHIEF SUB-EDITOR Milton Webber

MARKETING MANAGER Jackie Slavin

PRODUCTION MANAGER Felicity MoonPRODUCTION ASSISTANT Constance de Sousa

FINANCIAL MANAGER Andrew Lobban (ACIS, FCIBM)

ADMINISTRATION Tonya Hebenton

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FASCINATINGREALTIMECASESTUDYENTITLEDRISINGFROMTHEASHES


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HOT SEAT

444


In the early hours of aSaturday morning last year, the Track-

er building was engulfed in flames,

causing an estimated R40 million in

damages to the first floor of the build-

ing. Fortunately, no one was injuredand a comprehensive disaster recov-

ery plan was in place. A combination

of Trackers disaster recovery plan,

and its partnerships with the relevant

role players, ensured that what could

have been a business disaster turned

The chain of events following the fire that raged at Trackers building

early last year proved sobering and provided fascinating insight into

the dynamics of executing such a plan.

TRACKER FIRE A CASE STUDY

Risingfrom theashes

into one of the proudest moments in

Trackers history.

On the following pages, we look at

how the disaster recovery (DR) plan

was implemented by considering the

roles of the various players, what

they did right and the lessons that

can be learnt from this exceptionalexperience.

The exceptional teamwork and pro-

fessionalism of all the relevant role

players have been identified by all in-

volved as one of the key success fac-

tors in implementing the DR plan.

THE ROLE PLAYERS

The client Tracker

The DR site andservice provider IBM

The insurance broker Alexander Forbes risk

management services

The insurer Mutual & Federal

The loss adjuster Cunningham Lindsey

South Africa

The implementation of Trackers DR plan was impressive, turning apotential business crisis into a proud moment for the company.

Disaster recovery in act ion

Following a devastating fire attheir building in the early hours of a Sat-

urday morning early last year, Trackers im-

plementation of a well-planned and thor-

oughly tested disaster recovery (DR) plan

was nothing short of impressive: critical

services were recovered within three hours

and the execution of the total recovery plan

was completed within six days.

Of course, behind the scenes lay months

of preparation, testing and capital expendi-

ture spend to ensure not even a fire could

prevent Tracker customers and staff from

taking back tomorrow.

THE DISASTER RECOVERY PLAN

Business continuity is the number-one risk

on Trackers risk register, says Alan Hutch-

eson, CEO of Tracker. The first business

continuity plan was devised by an external

consultant as far back as 2004, and this planreceived a major overhaul in 2007. At the

time, a new DR contract was entered into

with IBM and the DR location was moved.

Following this overhaul, we maintained

Aftermath of the fire that ravaged the

Tracker building in 2009the discipline of continuously updating the

business continuity plan.

PLANNING

Hutcheson notes that several factors con-

tribute to successful planning of DR. You

have to know your business, and never

assume that a disaster will not happen. Sce-nario planning is crucial. But perhaps what

is most important is that business continu-

ity is taken seriously. The company must be

willing to invest time and money to facilitate


7/44

HOT SEAT

5


thorough planning and a DR plan owner

within top management must be tasked to

ensure that senior people are putting in the

time and effort required. Critical processes

and IT systems must be identified, and the

technology layout of the business must be

documented in such a way that non-IT peo-

ple can also understand it. The plan should

always cater for more, rather than less. Itmust also be remembered that small things

do matter, for example in this case, recover-

ing our staffs personal belongings as soon

as possible.

Documenting the plan in full is another

key element identified Hutcheson. If your

full business continuity plan is not docu-

mented, you better avoid the disaster. In

this specific instance, because there were

no casualties of key staff, we did not have

to implement the full plan. We had experi-

enced executives who had prepared the DR

plans to execute them.

Choosing the right DR location and sup-

plier is part of the planning process. Crucial

factors to consider include the proximity of

the DR site to the main business location

in terms of the risk versus the cost for both

natural and unnatural disasters, difference

in power and communication grids, as well

as operational practicalities such as staff

transport. The cost of a DR infrastructure, as

well as additional costs such as insurance,

must also be considered. The assistance of

a service provider with the right know-how

and facilities are invaluable to ensure the

right decisions are made, and for this rea-

son Tracker partnered with IBM.

IMPLEMENTATION AND TESTING

You cant have a plan on paper only,

says Hutcheson. Long before we needed

our business continuity plan, we had im-

plemented crucial aspects thereof, for ex-

ample, signing the DR site contract, pre-

paring the DR site and putting the right

communication infrastructure in place, in-

cluding updating staff contact details on a

monthly basis.

Successful testing was done in critical

areas. If possible, do a full test. Do not as-

sume that aspects of the DR plan do not

require testing. Develop testing plans and

record the results. Implement changes from

what you learn in the testing.

EXECUTION

Execution requires military precision, says

Hutcheson. The DR director must take

charge, maintain discipline and not allow

panic. Crucial to the execution is the right

person for the job, concise decision-making

and a skilled secretary who can document

all meetings and immediately distribute the

minutes with detailed action plans. Senior

staff need to be involved but only members

of the crisis management team should be

present at the meetings. It is also crucial as

top management trusts the appointed team,

and while holding people accountable, al-

lows reasonable freedom with regard to

decision-making.

In terms of technology, the relationships

with vendors, customer-partners, data and

telecommunication partners are critical. The

perceived rats and mice systems are im-

portant and companies should also consider

alternate technologies to make a change

over easier.

PROTECTING THE BRAND

A comprehensive communication plan tar-

geting the media, customers and stakehold-ers, as well as staff members, was immedi-

ately implemented to protect the brand.

The first step was to issue a holding state-

ment, conveying the following key mes-

sages:

Only the top floor of one of Trackers ad-

min buildings was affected.

A comprehensive Disaster Recovery Plan

is in place.

Tracker was still able to track and recover

vehicles.

There was no suspicion of a crime syndi-

cate attack.

Nobody was hurt.

Effectively, it was business as usual.

Once the company had established a firm

handle on the crisis, a proactive media re-

lease highlighting all the positive aspects

of the fire was disseminated. Constant con-

tact was maintained with key media to en-

sure that the facts accurately reported.

A general script was prepared for custom-

ers and other stakeholders, and the control

room staff were briefed to handle queries.

Key stakeholders and board members were

notified and a statement was posted on the

Tracker website. An emergency Tim from

Tracker recording session was scheduled.

Online social media and blog sites were

monitored and addressed. An advertorial

CRITICAL FACTORS FOR A

SUCCESSFUL DR PLAN

A strong and capable DR team to take controlof the situation.

Senior staff should be allowed to make

decisions pertaining to their areas.

Main focuses:

critical operations up and running ASAP

vigorously defend the brand

communicate with customers/partners

be sensitive and supportive to staff

thorough understanding of IT and

Ops systems.

Strong vendor relationships.

Loyal and committed staff acting

as ambassadors.

Dont underestimate the softer issues. Remain positive and maintain a sense

of humour.

Provide continuous food and refreshments to

the DR team and those helping out.

IFYOURFULLBUSINESSCONTINUITYPLANISNOT

DOCUMENTED, YOUBETTERAVOIDTHEDISASTER

KEY ELEMENTS OF SUCCESSFUL DR

Hutcheson identifies the following key

elements in a successful DR:

Planning

business continuity plan

documenting the plan

choosing the right DR location and

supplier Implementation

Testing

Execution

Alan Hutcheson, CEO, Tracker


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HOT SEAT ENTERPRISE RISKFeb10

branded DR site. Coloured Tracker shirts im-

proved coordination and stationery packs

were handed out. Hot snacks and drinks

were served and music played to lift morale.

All teams were fully briefed by their manag-

ers, before entering the state-of-the-art DR

site and logging onto all the normal Tracker

systems. A voice, fax and e-mail script was

prepared for all staff to help field queries on

the blaze.

TRIUMPH FOR TRACKER

R40 million of damages to the Tracker

building, a loss that in most other instanc-

es would have crippled a business, turned

into a triumph for Tracker. Perhaps more

importantly, the brand suffered no dam-

age because of a superbly executed

communications strategy.

Tracker staff, instead of being flustered

and disorganised, experienced some of their

proudest moments as they witnessed the

professionalism with which the recovery

was executed, a fact confirmed by the many

proud and congratulatory messages on the

Tracker website.

A crucial element of a DR plan is ensuring business continuity and

resiliency. This was highlighted in this case study.

IBM The DR site and service provider

Business cont inui t y and resi l iency

Following the fire at theirbuilding during the early hours of a Sat-

urday morning, the Tracker team ran their

operations from the IBM BCRS site for

60 days, requiring in excess of 500 seats.

The Tracker operations were relocated

within hours of the fire and as a result of

the exceptional planning and profession-

alism of all the parties involved, it was

business as usual even before news of the

fire broke.

Cynthia Crose, vice-president, integrated

technology services at IBM sub-Saharan

Africa, explains just how quickly the re-

covery plan was implemented. The IBM

BCRS team was summoned to the recovery

THE RIGHT BUSINESS RESILIENCY STRATEGY

Business resiliency can provide near-term cost efficiencies as well as strong, long-term ROI.

Mitigate risk Avoid the costs of downtime, brand damage and market share lost to competitors,

and reduce the financial impact from business disruptions.

Protect brand and revenue Properly assessing the threats to your IT infrastructure, their potential

business impact and your tolerance for risk can help you plan a realistic strategy.

Protect capital Analysing cost trade-offs can help you avoid unnecessary investment.Reduce costs Resiliency solutions can help protect you from failed restores and lost data.

Improve service You can align resilient infrastructure to the needs of your business to maintain

service-level agreements based on your tolerance for r isk.

facility even before the fire fighters had left

the scene, and by 10am the technical team

had started rolling out the call centre, and

the emergency control room was relocated

to the IBM BCRS site. By 11am, car track-

ing was up and running again, and by 2pm,

the call centre seats for Trackers staff were

ready and office seats were being rolled out

and delivered. By 5am on Monday morn-

ing, an IBM team, along with Trackers cri-

sis management team, were on site ready to

welcome Trackers staff and assist them in

getting them settled in.

Crose notes that there were several suc-

cess factors that contributed to the success-

ful implementation of the business conti-

nuity plan. These are graphically presented

in graph 1.

LESSONS LEARNED

In this case, a number of critical success

factors implemented by IBM were again

highlighted as crucial to a successful busi-

ness continuity plan, adds Crose. Firstly,

the business continuity processes need to

be flexible, while adhering to IBM govern-

ance guidelines. Secondly, test, test and

test to ensure the team not only knows,

but also owns the clients disaster recov-

ery plan. Thirdly, the value of having in-

frastructure 100% ready at all times was

also underscored again. And lastly, we

were reminded never to underestimate the

volumes of call records, people, etc., which

requires careful logistical planning in terms

of often-overlooked issues such as park-

ing, extra housekeeping requirements and

additional security.

Crose also says that testing and exercis-

ing is vitally important to ensure effective

and efficient business continuity. Apart

from making sure the business continuityplan works, testing and exercising is an

important way to train the relevant people

and to maintain a high state of readiness.

It also allows a company to capture any

Cynthia Crose, vice-president,

Integrated Technology Services, IBM,

sub-Saharan Africa

was placed in several key newspapers within

a day to put stakeholders minds at ease.

To avoid rumours and panic, positive

e-mails and SMSs were sent to all staff

members within hours of the blaze, followed

by details concerning their return to work.

Senior managers were briefed by trauma

counsellors to deal with their staff. To keep

inquisitive staff away from the scene of the

fire, a variety of photographs of the burnt

building were posted on the intranet site.

On the Monday morning, staff were greeted

by a welcoming committee to an extensively


9/44


7

HOT SEAT

changes and to audit the plan, while creat-

ing awareness among staff at all levels, as

well as among stakeholders.

BUSINESS RESILIENCY DOES MATTER

Many different threats and opportunities

can arise that can threaten the stability of

a companys business and IT operations,

from the obvious weather-related risks,

such as hurricanes or floods, to the unex-

pected, successful marketing or public rela-

tions campaigns that result in an overload

of a system and a subsequent crash, ex-

plains Crose. A business resiliency strat-

egy must centre on understanding all the

potential risks, which can be data driven,

business driven or event driven, across theenterprise.

IBM's successful business continuity

is illustrated in DIAGRAM 1

The broker plays a pivotal role in the relationship between the insured,

the insurer and external specialists such as the loss adjustor.

ALEXANDER FORBES The insurance broker

The role of t he broker

The recent Tracker fire claimclearly demonstrated how the right broker

can optimise the synergies between the vari-

ous role players in the insurance industry.

When the Tracker team arrived at their

premises on the morning of Saturday 17

January 2009 to discover an estimated

R40 million of fire damage, their first port

of call was their broker, Alexander Forbes

Risk Services.

Alexander Forbes risk services immedi-

ately appointed a loss adjuster, Cunning-

ham Lindsey South Africa, to visit Trackers

premises, assess the damage, investigate the

root cause and adjust the claim once it had

been formulated by the client and presented

by the broker to the insurer. On the Monday

following the fire, Mutual & Federal ratified

the loss adjusters appointment and within

48 hours after the devastating fire, the loss

adjustors preliminary report was received.

Since the loss was correctly covered by

the insurance policy arranged by Alexan-der Forbes, Mutual & Federal could swiftly

process the claim and make interim pay-

ments to assist Tracker with the immediate

costs faced.

Arranging the right cover with the right

insurer, acting swiftly within the insurers

mandate and choosing the right loss ad-

juster were crucial to the prompt settling of

the claim. However, perhaps most important

was the brokers role in arranging adequate

insurance and managing the clients ex-

pectations and experience throughout the

claim process.

The broker is the link between the in-

sured, the insurer and external specialists

such as the loss adjuster, managing expec-

tations and optimising synergies among

the various role players, says Jaco Smit,

business unit manager at Alexander Forbes

risk services.

THE BROKER-CLIENT RELATIONSHIP

In the relationship between the broker and

the client, it is crucial that the broker has a

thorough understanding of the clients busi-

ness. In essence, the broker must understand

the clients needs by having an in-depthunderstanding of his clients business and

then translate these into a comprehensive

risk management strategy to ensure that

all exposures to the clients business are

properly addressed.

A broker must take a holistic view of the

clients business, and provide the expertise

Jaco Smit, business unit manager,

Alexander Forbes risk services


10/44

HOT SEAT ENTERPRISE RISKFeb10

8

and insight to ensure an enterprise-wide ap-

proach to risk management is implemented,

says Smit.

THE BROKER-INSURER RELATIONSHIP

While the clients needs must always come

first, the value of long-term relation-

ships between brokers and insurers cannot

be underestimated.

It is crucial that both the broker and in-

surer clearly understand and operate within

the agreed mandate to ensure prompt settle-

ment of claims,adds Smit.

THE BROKER-LOSS ADJUSTER

RELATIONSHIP

One of the most important characteristics of

a good broker is the ability to harness both

internal and external expertise and experi-

ence. Usually, the insurer appoints an ad-

juster of its choice. However, an experienced

broker will liaise with the insurer prior to

the appointment of a loss adjuster to agree

on the latters availability, flexibility, skill

and integrity to ensure the client receives a

fair settlement, says Smit.

Warren Buffet said, It is only when the

tide goes out that you learn who has been

swimming naked."

"When facing a catastrophe of this

magnitude without the assistance of an

experienced broker, this bit of Buffet wis-

dom takes on a whole new meaning, com-

ments Smit.

DIAGRAM 2 Interlinked relationships

The raging fire at Trackershead office in Randburg caused an esti-

mated R40 million of damage. The chain

of events following the fire proved that a

trusting relationship between policyhold-

ers, short-term insurers and brokers can

result in swift action to solve a potentially

crippling problem, explains Ken Law-

rence, general manager: claims technical

for Mutual & Federal.

CHAIN OF EVENTS

The first link in the chain was the swift

reporting of the loss to Trackers broker,

the Alexander Forbes group. They immedi-

ately informed Mutual & Federal, and the

insurer responded rapidly by assembling a

senior team to deal with the loss.

Alexander Forbes also immediately ap-

pointed a loss adjuster. The loss adjusters

preliminary report was received within 48

hours, allowing the claim to be processed

without delay.

An internal special investigations unit

was appointed to establish the cause of

the fire, with the assistance of forensic in-

vestigators.A loss management plan was presented

to Tracker, providing clarity regarding the

claims process. To date, Trackers claims

experience had been exceptional, and

The fire that occurred at Trackers head office demonstrated the value

and peace of mind the right insurer can provide.

MUTUAL & FEDERAL The insurer

The role of t he insurer

given the substantial loss and potential

lengthy period of business interruption, a

number of interim payments were made to

Tracker to assist in reinstating the busi-

ness, says Lawrence.

KEY SUCCESS FACTORS

The claim was handled within the short-

est period and the business was reinstated

within hours. This can be attributed to a

number of key factors: Formidable teamwork between all par-

ties involved.

Mutual & Federals senior manage-

ment team dealing with the claim had

DIAGRAM 3 Illustrating Mutual &

Federal's partnership approach


11/44

ENTERPRISE RISKFeb10 HOT SEAT

9

extensive underwriting and claims man-

agement experience, as well as the au-

thority to make immediate decisions.

Alexander Forbes clearly understood

their mandate, duties and options

from the outset and coordinated the

entire process, while managing the

clients experience.

Mutual & Federal had a strong and posi-

tive relationship with the loss adjuster,

whose timely report was a crucial aspect

in the swift handling of the claim.

Tracker had a comprehensive disaster re-

covery plan, which was well executed.

LESSONS LEARNT

A number of pertinent lessons can be

learned from the Tracker claims process:

A partnership approach to good claims

management is required.

The loss adjusters roleis vital in the claims process and through

possible pre-loss nomination or knowledge,

a vital trust relationship can be established

with the insureds relevant representatives.

According to Ken Maclean, branch man-

ager, Cunningham Lindsey South Africa,

As students of insurance, we read about

the principles of utmost good faith and

the responsibility of the insured to dis-

close material facts. However, the need for

trust goes way beyond this. As far as the

insured is concerned, it is a two-way street

with the insured needing to trust and have

faith in all those involved in the insurance

arrangements both from a policy and claims

point of view.

The test of any insurance is the claims

service. Unlike many things that are bought,

it is invisible at the time of purchase and

therefore effectively taken on trust from

both parties to the contracts point of view.

The insured needs the comfort of trusting

the service and understanding what willoccur when and how, in the event of a loss,

to protect assets and trading as well as,

most importantly, reputation and brand.

The broker can play a vital role in the

appointment of a loss adjuster, ensuring

that the appropriate firm with the requisite

technical expertise and capacity is selected.

A trust relationship must therefore also ex-

ist between the broker and adjuster.

The first day on any major incident is

crucial as critical decisions will need to be

taken to ensure trading continuity. While

business continuity plans such as Trackers

disaster recovery plan may be in place,

the adjuster is influential in the decision-

making process, and the insured must have

comfort that the adjusters commercial acu-

men will have been gained by involvement

in a range of industries and loss scenarios.

Reputational risk runs far beyond any

coverage provided by the policy and this

is where the need for trust is the greatest.

Communication remains the key to reten-

tion of trust, an awareness of issues fac-

ing a business is vital and the broker again

has an important role to play in convey-

ing information not only to the insurer but

also to the adjuster in a claim scenario,"says MacLean.

Ken Lawrence, general manager, claims

technical: Mutual & Federal

Transparency and good communications

are essential.

Insurance must be recognised as the

final mitigation for the unexpected and

as the clients backstop.

Giving the broker a clear mandate to act

in the event of loss, such as the appoint-

ment of a loss adjustor from an approved

panel, accelerates the claims process.

For Mutual & Federal, this experience has

highlighted the importance of fostering

excellent business relationships with our

brokers and policyholders. When a short-

term insurer, broker and policyholder act

as a unified force, a large-scale disaster

can be resolved within hours and the

Tracker case study is proof of this, says

Lawrence.

Although being paid by the insurer, the loss adjuster acts as a mediator

between the insured and the insurer to achieve a fair settlement.

CUNNINGHAM LINDSEY SA The loss adjuster

Negot iat ing claim set t lement s

Ken Maclean, branch manager,

Cunningham Lindsey SA

Trust is mutual and in the context of

claims is best demonstrated by early re-

lease of funds through interim payments at

a time where cash flow is most likely to

be stretched.

With the nature and vast extent of the

damage, we have no reservations in plac-

ing on record that had it not been for the

Trackers disaster recovery plan, the loss

would have resulted in far serious implica-

tions from both a cost and business conti-

nuity point of view.


12/4410

COVER STORYGENERAL INSURANCE ENTERPRISE RISKFeb10

The context of a problem consistsof the strategic context, the organisational

context and the risk management context.

A working knowledge of the FAIS Act and a

documented business plan will assist in map-

ping the context for the development of a riskmanagement plan.

STRATEGIC CONTEXT

The strategic context includes the na-

ture of the environment in which a fi-

nancial advisory business operates. Some

questions advisers should look at are:

What relationships does the advisory busi-

ness have that are necessary for the busi-

ness to operate?

What laws, regulations, rules or standards

apply to the advisory business?

ORGANISATIONAL CONTEXT

The organisational context includes the way

the advisory business is structured and how

it operates, including the extent of operative

knowledge advisers have of their relevant ar-

eas of responsibilities. This context may be

technical or non-technical. It includes the ad-

visory businesses' aims, activities, structure,

membership and method of operation. These

are some questions to ask:

What are the aims and objectives of the ad-

visory business?

What is the core activity? Who is involved

both internally and externally?

What equipment does the business have

and/or use?

RISK MANAGEMENT CONTEXTThe risk management context includes the

nature of operational, technical and regulato-

ry frameworks and what is being done. Some

questions to ask include:

What is the advisory business currently do-

ing in terms of risk management, either for-

mally or informally?

Is the advisory business insured?

Is the advisory business a sole practitioner

or does it have a legal persona?

The goals, objectives, values, policies and

strategies of the business and how advisers

contribute to these are also important consid-

erations that help define the criteria by which

decisions are made about the acceptability of

risks, the form and basis of controls, and the

management options available.

Within this overall risk management con-

text, it is also important to identify the strate-

gic and organisational functions, such as:

business management

economic circumstances

corporate governance

commercial and legal

financial management

human resources

technology and systems

unnatural or natural events.

Once these functions have been identified,

risk management policies and strategies can

be considered.

RISK MANAGEMENT POLICY AND STRATEGY

To achieve an effective risk management sys-

tem, it is essential for advisers to develop a

clear policy statement, which should:

outline the scope and process

Before documenting a RM plan, advisers should first place the risks

they face in context, by understanding the objectives of their business

within the strategic and organisational environment. BY JOHANN MAREE

BROKERS CORNER

Preparing to document theRM plan

reaffirm commitment to resources

clarify roles and responsibilities

define documentation and report-

ing requirements.

This policy sets the framework for the risk

management strategy and applies to all ar-eas and entities within the business. Once

the context and policy framework is clearly

established, developing a risk management

plan becomes easier. The risk management

strategy should be integrated with other plan-

ning and management activities.

RISK MANAGEMENT RESPONSIBILITIES

All advisory business owners and staff are

responsible for:

developing and implementing the risk

management plan

reporting serious risk exposures and

all serious incidents to the advisory

business owner

reporting annually on the status of risk

management actions to the owner and the

compliance practitioner

assisting in identifying potential risk expo-

sures and for developing and implement-

ing risk mitigation plans for unacceptable

exposures, which may include:

preventing potentially damaging events

through minimisation strategies

providing decision makers with risk man-

agement information to assess acceptable

risks

where appropriate, transferring risk to

third parties through insurance and

contractual arrangements.

Other stakeholders may be invited to assist

to identify potential risks and suggest any

proposed mitigation.

JOHANN MAREE

Maree is the co-founder of both the Institute of Practice Management and Myriad

Planning Solutions, which develops rules-based integrated business solutions for

financial advisers.

Dont miss the next article in our Brokers

Corner series!

The next article will look at how to identify anddocument the risks advisers face.


13/44


14/44

Succeedingin adrastically

COVER STORYGENERAL INSURANCE ENTERPRISE RISKFeb10

The financial crisis has al-ready proved to be a watershed for the insur-

ance industry in many parts of the world.

The expectations of customers, investors,

governments and regulators from the in-

surance industry are changing rapidly andpervasively and as such, the environment

is expected to evolve at a rapid pace over

the next two to three years, ruling out any

return to the relative stability and certainty

that preceded the crisis.

This was revealed by the Pricewaterhouse-

Coopers (PwC) The Day After Tomorrow for

Insurance report, which gauged how the

global slump is reshaping the insurance in-

dustry and highlighted key developments

that are likely to affect particular segments

and geographical markets.

While the response related to the market

downturn has varied from country to coun-

try, there is an overall feeling of uncertainty

that defines the industry, says Victor Mu-

guto, Southern African insurance leader at

PwC.

Even companies that did not re-

quire bailouts have responded to

government requests to cut costs and spend

more effectively.

It is clear that all insurers across the world

will be required to transform their business

practices to suit the changing sector. This

shake-up will challenge the competitive rel-evance of some insurers. However, it also

offers agile and farsighted firms a once-in-

a-generation opportunity to catapult them-

selves to the front of what will be a very

different racing order within many geo-

graphical markets and classes of business.

CHANGING CUSTOMERS

Customers faith in financial institutions has

waned, internationally. As capital disap-

peared from the markets, customers have be-

come more cautious, preferring to hold on to

their cash. Those who are prepared to invest

their money are starting to favour simpler

and less risky products.

What customers demand from savings

and investment products and how they

want to buy them will take a new direc-

tion within many territories, with compa-

nies that are slow to catch on, becoming

increasingly marginalised.

Clearly, customers will eventually start

spending, but will search for more effec-

tive risk protection. The key question is,

on what terms will customers choose to re-

engage with insurers and how may product

and distribution strategies need to change

to encourage them back into the market?

says Muguto.

Whats more, consumer demand profiles

are also changing in South Africa. Like their

counterparts in the developed world, the lo-

cal insurance industry must react to these

changing customer needs. Customers are be-

coming more discerning and better able to

make informed choices.

The current insurance landscape is drastically different compared to the

market before the global financial crisis, enabling some insurers to pull

ahead from their competitors and leaving others behind.

INDUSTRY INSIGHT

In addition, local insurers must also ad-

dress the perceptions of the insurance indus-

try in the low-income market. The challenge

for the industry is perhaps greatest in those

market segments that have no awareness of

insurance or see no benefit in it. Interven-tions to educate, inform and reach potential

consumers are important and may present

viable opportunities for local insurers.

IMPACT OF DISTRIBUTION CHANNELS

The disillusionment created by the crisis in

many of the more developed markets could

affect channel preferences. In Germany and

Switzerland, for example, there has been

strong unease about the charges and plum-

meting returns from many annuities. This

is leading to a growing switch from tied to

independent advisory channels, as custom-

ers seek more thorough and unbiased advice

about which products match their risk ap-

petite and demand profile. This echoes de-

velopments in the US in the1990s, and in

the UK in 2000 and after. In some countries,

Hong Kong, for example, buying insur-

ance through strong and trusted banks is

becoming increasingly popular once again.

Companies will naturally need to keep their

ears to the ground and adapt their chan-

nel strategies to what could be rapidly

changing preferences.

INCREASING REGULATORY INTENSITY

Under pressure from governments, supervi-

sion in financial services will be more intense

and regulations will be more subject to na-

tional priorities in their interpretation and

application. Some countries are going the

extra mile in developing tough regulatory

regimes with a focus on governance and risk

management. As a member of the Interna-

tional Association of Insurance Supervisors,

South Africa toois expected to

follow its lead.

As such, we can

anticipate an

GREATERTRANSPARENCYANDCOMPARABILITYOFFINANCIALANDRISK

DISCLOSUREWILLBECRITICALINGAININGACCESSTOTHELIMITEDSUPPLY

OFAVAILABLECAPITAL. VICTOR MUGUTO, SOUTHERN AFRICANINSURANCELEADER, PWC

12


15/44

GENERAL INSURANCEENTERPRISE RISKFeb10

transformedinsurance sector

Successful administration, prompt & efficient claims management and world-class customer service

determines both the market success and member satisfaction of any given medical fund.

To find out more about SMS flawless administration

and dedication to service excellence contact

(011) 353-0048 or visit www.sechabamedical.co.za

Since inception in 1978, Sechaba Medical Solutions

(SMS) has positioned itself as one of the best

medical fund administrators in terms of IT systems,

service and empowerment in South Africa today.

Its strong empowerment history gives SMS the

edge as it understands the healthcare needs across

South Africas racial and cultural diversity.

Its IT and service strengths have ensured its

flexibility to adapt to the demanding legislative

healthcare requirements that have evolved with

time. This powerful combination ensures that

SMS is well placed as a key player in the current

healthcare environment.

An authorised financial services provider

increase in supervision, with increased focus

on solvency, governance, consumer protec-

tion and risk management.

INVESTORS DEMAND RISK MANAGEMENT

A common thread is the emphasis on strong

ERM. he pursuit of innovation and capital ef-

ficiency has given way to focus on stability

and risk management.

Analysts and investors require a more sys-

tematic approach to effective risk manage-

ment. Greater transparency and comparabil-

ity of financial and risk disclosure will becritical in gaining access to the limited sup-

ply of available capital.

Market confidence also continues to be un-

dermined by the absence of a relevant and

globally consistent insurance accounting

standard and lingering concerns related to

consistency of embedded value methodolo-

gies and assumptions.

GOVERNMENT INFLUENCE

Although those governments that have bailed

out insurers are eventually likely to divest

their direct holdings, their influence across

the sector will continue. Other governments

however may continue to offer substitutes to

insurance, such as trade and credit schemes

and being the insurer of last resort.

This could result in competitive distor-

tions and impede market development and

once in place could be difficult to with-

draw. On the other hand, governments

that have recapitalised parts of the insur-ance sector may insist that taxpayers are

given a more favourable deal from the

insurance industry.

KEY DEVELOPMENTS AND THEIR STRATEGIC

IMPLICATIONS

Continued uncertainty involving de-

mand, inflation, stock market performance

and budget deficit scenarios will plague

the market.

The reshaped environment will present both

transformational opportunities and signifi-

cant threats for businesses that fail to antici-

pate and adapt to the changes ahead.

A number of short-term themes have also

been sparked by the financial crisis. Height-

ened risk concerns and the need to rebuild

balance sheets have forced many insurers to

follow more conservative investment paths.

Firms that have been leading the way in driv-

ing home effective risk management prior tothe crisis have already been implementing

this strategy.

Statistics show that the economic down-

turn has been tough on our local insurers.

The slowing economy has led to, among oth-

ers, rising claims. Local insurers should view

this time as a period of challenges and op-

portunities.


16/44

INDUSTRY INSIGHT

2010 chal lengesandopportunitiesEnterprise Risk asked the short-term insurance industry leaders to share

their insights regarding the challenges and opportunities 2010 will bring.

Johnny Symmonds, MD,

Lombard Insurance

Single greatest challenge:

There are a number of significant

challenges facing the industry.

The first and probably the most

important is attracting and retaining

quality skills. Secondly, regulation

is becoming increasingly complex,

while regulatory authorities

are becoming more hands on.

In addition to industry-specific

regulation, there is an increasing

interrelationship between various

new acts, and future regulations

such as financial condition reporting

and the possible 'green' legislation

will add to the complexity. Global

warming, its impact on weather

patterns and the associated

increase in insurance losses, is

another great challenge facing the

industry. Lastly, the industry faces

constraints in terms of reinsurance

capacity, both in terms of capital

available at a catastrophe level and

in particular the capital available for

guarantee classes.

Greatest opportunities: The growth

in the middle class, traditionally a

major market for insurance products,

is growing, creating opportunities for

the industry. In addition, we have a

large untapped, uninsured market,

which holds great opportunities for

those insurers who can find the

right solutions to product pricing

and market access. The recent

credit crunch has also createdopportunities, particularly in the

credit risk sector, by highlighting the

vital importance of managing

credit risk.

Barry Scott, chief executive,

SAIA

Single greatest challenge: The

biggest challenge for short-

term insurance generally, and

SAIA specifically, will be to

draft and implement a holistic

and comprehensive strategy to

address motor insurance. Such

a strategy will not only have to

address the risk, but also the cost

of motor insurance claims to keep

motor insurance affordable and

motor insurance as a business

class sustainable.

Greatest opportunities: The

market has yet to tap into the

low-income market although a

few of our members have startedexploring possibilities in this

market with low-key activities.

Companies which use the lessons

learnt from mistakes made in

the micro-insurance space, and

innovatively enter the untapped

market in the near future, will

reap unexpected benefits. The

SAIA financial literacy consumer

education initiatives planned for

implementation in 2010 should

enhance opportunities for short-term insurance companies with

appropriate products.

Jurie Erwee, Alexander Forbes

risk and insurance services

Single greatest challenge:

Those who attract and retain the

best talent will reap the benefits

as new opportunities present

themselves. Advancing technology,

environmental risks and corporate

governance will dominate

boardroom discussions in 2010,

presenting opportunities for risk

advisors and the insurance market

as institutions and individuals

seek enterprise-wide solutions to

emerging risks.

Greatest opportunities: More

companies will be adopting a

'high-risk, high-reward' approach

in seeking profits from emerging

markets, including Africa. Thisprovides exciting opportunities for

South African-based risk advisors

and carriers with representation

and experience of doing business in

Africa. South African insurers have

been slow to expand into Africa but

expect this to change as the focus

on investment opportunities in

emerging markets and particularly

opportunities in the financial services

arena will increase in 2010.

Guy Scott, CEO, Aon RiskServices

Single greatest challenge: Perhaps

the most difficult risk management

issue is ensuring that organisations

remain committed to established,

effective risk management

strategies. Risk control efforts

should not be ignored for the sake

of immediate expense cutting. A

comprehensive and successful

response to this global economic

downturn requires the consistent

application of excellence in all

facets of risk management.

Greatest opportunities: Those

organisations who have successfully

weathered the storm with

stringent expense management

and successful talent retention

strategies, coupled with continued

investment in innovation, will benefit

from the flight to quality in terms of

the consumer behavioural change.

Efforts should be focused on quality,as there is a higher expectation of

value for money from consumers.

A constant investment in new ideas

and solutions is paramount in the

ENTERPRISE RISKFeb10SHORT TERM

14


17/44

IN-HOUSE

COUNSELUnderstanding YOUR role and strengthening yourcompanys protection against legal liabilityConference highlights and interactive sessions include:

Discussing the Sections o the Companies Act that will be afected by new dratingAligning legal policy with the business bottom-lineDiscussing the uture o risk and corporate governance compliance as a unction o the In-House CounselHighlighting the current corporate case lawMastering your contract negotiation and drating skillsManaging the use o your external advisor and controlling the cost to companyDening the In-House Counsel role in accountability to ethical business practice

Pre and Post Practical Conference

Workshops:

Practical techniques or incorporating theCompanies Bill into your policies and proceduresFacilitated by:Jacques Peters,Director, Jacques PetersConsulting CCDate: 15 March, 2010

Mastering your contract negotiationand drating skillsFacilitated by: Gavin Weiman,Attorney,Weiman Consulting

Date: 18 March, 2010

T

T

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15, 16, 17 &18 March 2010The Wanderers Club,Illovo, Johannesburg

Fax the below form to 011 880 6789 or for more information call 011 771 7000 or visit www.iir-conferences.co.za

Title: __________________ Name: ________________________________________________________________________________________________________

Company: _____________________________________________________________________________________________________________________________

Job title: ______________________________________________________________________________________________________________________________

Tel no: ____________________________________________________________ Fax no: ____________________________________________________________

Email address: _________________________________________________________________________________________________________________________

Please send me further information about In-House Counsel P3122 ER

t: 011 771-7000 | e: [email protected] | w: www.iir.co.za/inhouse

Researched and Developed by:Strategic Partner: Media Partner:


18/44

creation of competitive advantage

same old, same old is just not

enough anymore.

Paolo Cavalieri, chairperson,

Etana Insurance

Single greatest challenge: Our

biggest challenges as an industry are

finding creative and effective ways ofcontending with economic pressure

for ourselves and our clients; finding

ways to progress meaningfully in

areas such as people and leadership

development; and attracting top

talent, so we will have strong and

skilled people to move forward.

Greatest opportunities: There has

never been a more critical time for

brokers to demonstrate their value

to clients in ensuring all avenues

of risk are adequately covered,

without paying for insurance they

dont need. The insurance industry

needs to be innovative in supporting

BBBEE goals and has opportunities

to use its personal connections with

millions of policyholders to make

meaningful contributions in the area

of consumer education. We also

all have opportunities to sensitise

government and consumers to risk

management.

Michael Blain, CEO, Centriq

Insurance


new binder regulations and medical

demarcation regulations will be the

most keenly watched development

in the first half of 2010. The second

half of 2010 will see South Africa

focusing on its many challenges,

especially how to capitalise on and

maintain the economic momentum

of the World Cup. The insurance

industry will continue focusing on

motor-loss ratios and the cost of

motor vehicle repairs to restore

profitability; risk management; risk

surveys and risk premium rates.

Another challenge is the ageing

public infrastructure and lack of

maintenance owing to the economic

environment and the consequent

impact on claims.

Greatest opportunities: Companiesthat are flexible and entrepreneurial

with solid shareholders and the best

skills will survive the consolidation

among insurers and underwriting

agencies in the next 18 months.

Brand Pretorius, CEO,

Momentum Short-Term

Insurance


challenge for insurers will be to

manage the expected increase in

costs, without transferring all of the

cost pressures to the consumer.

The successful insurers in 2010

will be those who are the most

accurate in determining the risk

profile for each individual client and

charging the appropriate premium.

This requires a greater emphasis

on risk management and improved

harnessing of technology for greateroperational efficiency.

Greatest opportunities: Indications

are that a turnaround in the economy

can be expected during 2010. This

could result in growth opportunities

for the industry in general.

Keith Kennedy, MD, Mutual &

Federal

Single greatest challenge: Growth

in the short-term insurance industrywill be challenged by the state of

the economy. The weather is also a

wild-card factor for the short-term

insurance industry, becoming more

unpredictable over the years, and

claims relating to such events are

more frequent and larger.

Greatest opportunities: We should

see some buoyancy in the economy

in the first half of the year leading

up to the 2010 World Cup. Many

businesses will require various forms

of cover during this period and we

should see an increase in policies

written.

Pierre Geyer, head: broker

division, Hollard


stressed economy will push clients

to seek more perceived cost-

effective or alternative insurance

solutions. The anticipated changes

in legislation, particularly related tobinder agreements, may negatively

affect client service and operating

costs for intermediaries. The

increasing supply-chain costs of

particularly motor-vehicle spare parts

and autobody repairs remain a cause

for concern in terms of claims costs.

Greatest opportunities: The Soccer

World Cup 2010 will have a hugely

positive impact on the economy,

which will spill over to the insurance

industry. Brokers need to examine

the needs of all their clients with

this in mind. With the new FAIS

requirements, a number of non-

compliant brokers will exit the market,

creating acquisition opportunitiesfor other brokers. With general

service levels deteriorating in certain

insurance channels, the broker will

also remain vital to their customers.

Ian Kirk, CE, Santam


domestic economy is starting to show

early signs of recovery, but such

recovery will be slow a scenario

that requires focused attention

on the management of risk. The

impact of climate change must

feature prominently on the industry

agenda. 2010 will also see clients

making greater demands for quality,

innovation, service and appropriate

costs. Santam further expects to

see a continuation of mergers and

acquisitions in the intermediary space.

Greatest opportunities:As with

2009, 2010 will be challenging for

the industry. All players will need tostay on top of their game, but these

challenges inevitably will create

opportunity. 2011 will likely be the

year of recovery for our industry.

ANOTHERCHALLENGE

ISTHEAGEINGPUBLIC

INFRASTRUCTURE


16


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22/44

Companies are well advised to takeup recall cover or increase their existing cover be-

cause the Consumer Protection Bill has been promul-

gated into law. In more mature markets like the UK

which have similar laws in place, an increase in over-

all product recall of 125% between 2004 and 2007 hasbeen seen. With regard to non-food products, a mas-

sive 894% rise was recorded between 2004 and 2007,

explains Keith Marshall, regional manager, liabilities

group, Africa region of Chartis South Africa.

Certain sectors will be at higher risk because of

the implementation of the CPA than others, and the

controls required will differ accordingly. These risk

ratings and controls are detailed in table 1.

Retailers will be more responsible for the products

PRODUCT RECALL

BewaretheCPA...With the Consumer Protection Act coming into force shortly, companies

need to understand the impact it will have on their product recall

insurance. BY KEITH MARSHALL - CHARTIS

they sell following the implementation of the Con-

sumer Protection Act (CPA), as consumers will be in

a position to return unsatisfactory goods to the re-

tailer as opposed being restricted to seeking recourse

solely against the manufacturer, explains Marshall.

This means retailers can be held as accountable asa manufacturer the middle man status has been re-

moved. Retailers should advisably seek to ensure that

their suppliers have recall plans in place along with

full-blown recall insurance. This is due to the fact that

consumers are now in a position to hold the retailer as

accountable as the manufacturer.

GET THE COVER NOW

Marshall says that an increase in recall cover pre-

miums is likely since there are more rights of re-

course for the consumer as is intended by the leg-

islation. This is likely to translate into more claims,

increased legal action, and therefore higher premiums

and/or deductibles.

In terms of the underwriting criteria, the retailer

and a manufacturer will now be rated equally as the

exposure to claims increases with the consumer hav-

ing access to greater routes of recourse. There is a

potential for retailers to carry even greater exposure

than a single manufacturer, since the retailers will sell

multiple products from a variety of manufacturers.

In a nutshell, buying cover now would be cheaper

for two reasons, notes Marshall. Firstly, if we con-

sider the trends evident in the more mature markets,

we know that a spike in claims is inevitable. Secondly,

forming a relationship with an insurer now enables

the insurer to have a better understanding of what

the insureds activities are and what the specific risks

are. This translates into more favourable terms, as the

insured is not gauged against industry standards. For

instance, when dealing with a high-hazard industry

such as the tyre industry, an insured in such an indus-

try that has had a quantifiable claims history (prefer-

ably a good claims record) in say over five years, will

be in a more favourable position.

ISSUES TO CONSIDERThere are a few factors that companies should be con-

sidering in light of the implementation of the CPA

renewing or taking out products recall insurance as

detailed in table 2.

SECTOR RISK RATING CONTROLS REQUIRED

Retail and

distribution

High Supply chain management including supplier

insurance

Contract certainty between suppliers and consumers

Complaints handling processes and proceduresProduct recall plans, processes and procedures to be

set up by the insured with loss controls assistance

where applicable.

Manufacturing Medium to

high

Supply chain management including supplier

insurance

Contract certainty between suppliers and distributors

Increased quality control on product functionality,

safety, education in the form of manuals and labelling

Complaints handling processes and procedures

Product recall plans, processes and procedures

Services Medium Contract certainty between suppliers and consumers

Complaints-handling processes and procedures

TABLE 1 Risk rating

and controls

TABLE 2 Liability

INSURED INSURER

Strict liability resulting in increased claims

and settlements.

Increased limit as per exposure to risk of

liability.

Increase costs in the form of:

quality control

supply chain management

vetting of suppliers

claim payments

counter claims against suppliers.

Increased information requirements:

loss control

processes, procedures, controls and

monitoring systems.

Insurance packaging:

warranty and inefficacy covers

increased limits for financial loss.

Review information provided and provide

efficacy and/or financial loss cover on a

selected basis subject to specific terms and

conditions.

20



23/44

COVER STORY

Featuring key presentations fromthe following experts:

Examine these hot topics!

Prepare your organisation or the new

17 & 18 March 2010

Hyatt Regency, Rosebank,

Johannesburg

Examine these hot topics!

How to process personal inormation incompliance with the new bill

Find the balance between protection o personal

inormation and legal requirements o access toinormation

How will the new bill afect your directmarketing?

International trends and strategies: What can youlearn?

Managing data throughout the organisation:Evaluation o processes and procedures

Featuring key presentations fromthe following experts:

Iain Currie, University o Witwatersrand

Anneliese Rose, UNISA

Warren Wertman, Bowman Gilfllan

Tim Hanlon, Strategic Management Services

Graham Dominy, Department o Arts andCulture

TO REGISTER:

+27 11 771 7000. [email protected], www.iir-conerences.co.za/protectionResearched and Developed by:


Title: __________________ Name: ________________________________________________________________________________________________________

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Please send me further information about Protection of Personal Information Bill P3125ER


24/44

COVER STORY ENTERPRISE RISKFeb10LONG TERM

22

Leon Campher, CEO,

Association for Savings and

Investment South Africa

(ASISA)

Lessons learnt from 2009:2009,

although tough, proved to the

savings and investment industry,

its regulators and our policy maker,

that we are largely on the right track

with our approach to regulation

and the way we do business. We

can be proud of our resilience

during global financial market

crisis the credit goes to a strong

regulatory framework overseen by

the Financial Services Board and the

largely prudential management of

businesses by the private sector. As

an industry, we were also surprised

by the faith displayed by our investors

as inflows into the savings and

investment industry remained largely

positive throughout the year.

Strategic priority for 2010: A key

strategic priority is to partner with

government and other stakeholders

At the of 2009, Enterprise Risk spoke to the

captains of the life industry about lessons learned in

2009 and strategies for 2010.

INDUSTRY INSIGHT

Lessons from the past,

priorit ies for the future

on the South African incorporated

strategy, promoting South Africa asthe economic gateway to Africa. The

savings and investment industry, as

represented by ASISA, must deliver in

terms of its continued relevance and

sustainability as the custodian of the

nations savings by growing a strong

public/private partnership based

on trust.

Steven Braudo, MD,

Liberty Life

Lessons learnt from 2009: 2009

reemphasised the fact that without

a happy and satisfied customer,

the entire industry is at risk. Harsh

economic times often force one to

reflect and take stock, and that hascertainly been true for us. We have

always known that the customer is

at the core of everything we do, and

2009 reaffirmed the importance of

resilience and flexibility to assist our

clients in tough times.

Strategic priority for 2010:

Without a doubt, one of our greatest

strategic priorities involves keeping

the customer at the centre of every

business strategy and decision. This

will involve not only bringing new

customers into the Liberty family, but

also retaining our existing customers

by remaining relevant and adding

value to their lives. I speak for the

Liberty team when I confidently say

that we are ready, willing and able

to shake things up and exceed the

highest expectations that we have set

for ourselves.

Phillip Matlakala, CEO,

Metropolitan Retail

Lessons learnt from 2009: Our

better-than-expected persistency

levels affirmed that our customers

are beginning to understand

the value of their investments

perhaps a sign of a shift towards

a savings culture? Legislative

reform has changed the way we

do business both operationally

and in principle with huge cost

implications. Intermediaries were

also affected with stringent FAIS

regulations forcing out those who do

not comply. This, coupled with the

fear of new graduates pursuing a

dying profession has created a skillsdearth.

Strategic priority for 2010: The

focus for 2010 will be on further

optimising the way we do business,

leading towards sustainable practices

that place the customer at the core.

We will continue in our commitment

towards improving financial literacy

by upskilling our intermediaries.

We anticipate that implementing

legislative changes will continue

throughout 2010. Our focus will be

on the things within our control, such

as active management, competitive

and appropriate products and

improving the quantity and quality of

our human resources.

Nicolaas Kruger, CEO,

Momentum group

Lessons learnt from 2009: Threelessons deserve mention. The

value of effective and appropriate

risk management is the first

important lesson. It is critical for

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25/44

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26/4424

life insurance companies to have

an in-depth understanding of

how their business will react to

different risks. Secondly, business

diversification provides protection,

as different business units

react differently to challenging

conditions. Finally, the past year

instilled a greater appreciation for

South Africas financial regulatory

landscape, where measures such

as exchange controls shielded

us from the worst of the global

financial crisis.

Strategic priority in 2010: I think

discussions around retirement

reform will accelerate in the next

year. Industry has a vital role toplay in shaping South Africas

future retirement landscape and

this will surely be a focus area

for life insurers during 2010.

As important is the debate and

consultation around the National

Health Insurance. Momentum

looks forward to working with

industry and government to

make meaningful contributions to

establishing a sound foundation

for an inclusive financial

services industry.

Selwyn Kahlberg, MD,

Alexander Forbes Life

Lessons learnt in 2009: Get

the basics right! This means a

strong back office, sound claims

management processes and a

great team of people threefactors that saw Alexander Forbes

navigate the recession with

success. A strong back office

ensures clients are happy and

that management can access

the numbers (sales volumes,

cash flow, solvency) quickly

and confidently. Sound claims

management processes protect

against the increases in both

fraudulent and disability claims. A

great team of people will carry a

company through almost

any situation.

Industrys strategic priority for

2010: There are two priorities

for 2010 firstly, maintaining

solvency and profitability, while

being prepared for the next shock

to the system and secondly,

achieving growth in a highly

competitive space. The challengewill be to create meaningful

product differentiation while

providing a value-for-money

proposition. The quality of the

brand will play a large role in

achieving success.

Herschel Mayers, Discovery

Life and Invest

Lessons learnt in 2009: It is

crucial to ensure that the business

is built on quality foundations.

The products offered have to

meet customers needs and

requirements in a dynamic, rapidly

changing environment. If the

right building blocks are in place,

growth, investment and positivity

is required, especially in tough

economic times. These are the

ingredients for ultimate success

when the economic cycle turns forthe better.

Strategic priority for 2010: Our

priority in 2010 will be to continue

to grow and invest in the business

in South Africa, and to ensure that

Discovery Life is at the forefront of

innovation, exhibiting leadership

in the life assurance industry. We

will also expand our operations

and success in the UK.

Liz Lambrechts, chief

executive, Sanlam Personal

Finance

Lessons learnt from 2009:

2009 clearly showed us how

important it is to have a visionary

long-term strategy for resilience

in good and bad times, and that

the courage to implement that

strategy, even in challenging

times, is crucial for survival.

Five years ago, the Sanlam

group embarked on a strategy to

diversify and place client centricity

at the heart of our business. This

strategy proved extremely resilient

and allowed us to perform well

this year.

Strategic priority for 2010:

Our greatest strategic priority

for 2010 is to reestablish the

trust of consumers and change

consumer behaviour. Consumers

are sceptical about both the

performance and the ethics ofour industry, and have a more

sophisticated understanding of

financial solutions. As such, they

now demand transparency, fair

treatment and better service.

The industry has gone some way

towards addressing such issues

but much remains be done in

2010 to raise the image of the

financial services industry and

position it as genuinely

client centric.

David Price, MD, Liberty

Corporate

Lessons learnt from 2009:

Liberty Corporate has had a

successful year, despite the tough

environment. As a business, we

have resolved to harness the

pressure of 2009 as a positive

catalyst for change. We have been

honoured to be recognised for our

efforts by winning two industry

awards: the 2009 FIA Employee

Benefits Product Supplier of the

Year Award and the 2009 PMR

(Golden Arrow) Award for Large

pension fund administrators and

product providers insurers.

Strategic priority for 2010: The

challenge in 2010 is to remain

focused on delivering on our

promises and building on a very

strong base in what is a constantly

changing environment. Top of

mind is making the customerjourney a seamless, pleasant

experience, and ensuring that we

are the first choice of advisers

across the field.

PRODUCTSOFFEREDHAVE

TOMEETCUSTOMERS

NEEDSANDREQUIREMENTS

COVER STORY ENTERPRISE RISKFeb10LONG TERM


27/44

The Commission of Employment Eq-uity Report 2008 2009 from the Department ofLabour indicated that the percentage of permanently

employed people with disabilities in the formal sec-

tor has reduced from 1% to 0.7% compared with the

previous year, despite targets set by the employment

equity regulations.

People with disabilities experience high unemploy-

ment levels and often remain in low-status jobs. Ig-

norance, fear and stereotyping contribute to possible

unfair discrimination against people with disabilities

in society and in employment. This unfair disability

discrimination is perpetuated in many ways. There

are many unfounded assumptions about the abilities

and performance of job applicants and employees

with disabilities. Workplaces are sometimes inacces-

sible and training is not always appropriate for peo-

ple with disabilities.

FAR-REACHING BENEFITS

People with disabilities can contribute their skills and

abilities to the economy and society if employers re-

move unfair discriminatory barriers and provide rea-

sonable accommodation. The cost of claims on public

social security and occupational benefit schemes can

be reduced if employees with disabilities are retained

at work.

In practice, there is actually a lot that companies

can do accommodate disabled employees and ben-

efit from their skills and abilities, while meeting

legislative targets.

INSURANCE SOLUTIONS

For example, it is prudent for any employer to pro-

vide insurance cover for unplanned events such as

employees becoming disabled due to illness or ac-

cident. This would make employees eligible for in-

sured benefits if they were not able to perform theirregular occupation because of a disability resulting

from illness or accidental injuries. Group disability

insurance policies provide benefits on an income re-

placement basis or payment of a lump sum benefits

In practice, companies can do a great deal to accommodate disabled

employees and benefit from their skills and abilities while meeting

legislative targets. BY ANTON ENGELBRECHT, ALEXANDER FORBES HEALTH

DISABLED EMPLOYEES

Reasonable accommodationin the workplace

in conjunction with retirement benefits from the re-tirement fund.

As such, the provision of disability insurance by

employers should be viewed as a part of a disability

risk management strategy in the workplace.

REGULATORY ISSUES

Historically, employers accepted the insurers deci-

sion in terms of the validity of the disability claim

submitted without applying the provisions stipulated

in Schedule 8 of the Labour Relations Act (LRA).

These provide a clear procedure requiring the em-

ployer to investigate any medical incapacity of an

employee prior to termination of the employee-em-

ployer relationship with an intention of retaining

the employee in his or her occupation or even a dif-

ferent occupation as far as reasonably possible.

Furthermore, the Code of Best Practice on Key

Aspects of Disability in the Workplace issued by

the Department of Labour provides a guideline for

employers, employees and their representatives to

develop, implement and refine disability equity

policies and programmes to suit the needs of their

respective workplaces.

A number of initiatives can be undertaken by em-

ployers not only to comply with the requirements of

the Code of Best Practice but also become the em-

ployer of choice for persons with disabilities.

Designing a strategy that would achieve compli-

ance with the Code of Best Practice as well as assist

companies become an employer of choice would in-

clude the following objectives:

ensure all human resource policies comply with

relevant legislation, i.e. Employment Equity Act

and the abovementioned Code of Good Practice

create an environment that is disabled-friendly,

physically accessible and socially accommodative

actively drive to recruit and select suitable disabledcandidates for all vacancies and to rehabilitate and

train employees who become disabled

provision of further training and career advance-

ment opportunities for persons with disabilities.

ANTON

ENGELBRECHT

Engelbrecht (BMedSci,

BSc (hons) Bio

Systems Cum Laude,

MBA) is a business

development andstrategic consultant

at Alexander Forbes

Health.

ENTERPRISE RISKFeb10 EMPLOYEE BENEFITS

25


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The main purpose of an RA fund is toprovide a life annuity upon retirement of a member of55 years or older, or annuities for the dependants or

nominees of deceased members.

In order to encourage saving for retirement, the In-

come Tax Act allows for deductions from a taxpayers

income, up to certain limits, for contributions made to-

wards retirement savings, explains Navin Ramparsad,

head: legal and compliance at Momentum Wealth. Typ-

ically, clients can claim a deduction equal to a maximum

of 15% of non-retirement funding income; or R1 750; or

R3 500 less allowable pension fund contributions.

In terms of current legislation, contributions in excess

of the allowable deduction will be taken into account

at retirement and potentially increase a clients tax-free

amount. It is advisable to contribute as much as possible

towards retirement savings, but at the very least clients

should endeavour to contribute at least the maximum

allowable deduction towards retirement, as this will also

assist in minimising their tax liability.

Erica Stuart of Liberty Group Advisory Services elabo-

rates: If a client contributes a R100 000 lump sum

into his/her retirement annuity then he/she would

qualify for a deduction. SARS will apply the formula

to determine what the tax deductible amount would

be. It is important to note that if an employee

qualifies for a tax deduction now, these

amounts will be deducted from his/her

tax-free amount at retirement.

Upon retirement, up to one-third

of the benefit may be taken as a lump

sum. Up to R300 000 of the total lump

sum received from pension, provident

and RA funds during a persons life-

t

EntRisk Feb10

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Transcript of EntRisk Feb10