Resilience. The key to 2015. - FM Global Touchpoints · 9. Manufacturing risk – adapting for...
Transcript of Resilience. The key to 2015. - FM Global Touchpoints · 9. Manufacturing risk – adapting for...
SPECIAL REPORT
Resilience. The key to 2015.
Sponsored by
In the last 12 months, Touchpoints has featured many articles from CIR, written
exclusively for FM Global. As companies prepare for 2015, this Special Report asks
“what are the main challenges that companies will face?” and “how can resilient
behaviours help?”.
In this report, we bring together ten key articles from 2014, with a new unpublished
article: “Are you on track for resilience in 2015?”.
This concise guide provides trends and debates around the world of risk
management, stressing the need for resilience in the year ahead.
Contents:Page
3. Are you on track for resilience in 2015?
4. Averting crisis: A roadmap for risk managers
5 Nanotechnologies: Small things, big business
6. Environmental damage and consequence
7. The Internet of Things in logistics
8. Leading through innovation
9. Manufacturing risk – adapting for resilience
10. Risk in the retail sector
11. Rethinking global risk
12. Going for green
[ ]Resilience
15
april 2013cirmagazine.com
An interruption or failure in the supply
chain can have far-reaching impacts,
regardless of the type and size of an
organisation. Reduced operational capability,
product recall, unmet contractual obligations,
lost market share and the potential resultant
reputational damage are among the most
common of these risks. But in most of today’s
global enterprises, protecting the continuity and
resilience of these increasingly complex chains
is a major task.
In terms of complexity, the manufacturing
sector has the greatest challenge. Risks
including logistics, component availability,
transportation and regulatory challenges all
require constant attention. Other, external
factors are worthy of consideration, including the
knock-on effect of natural disaster, illustrated,
for instance, by the intricate interconnectivity
of risks where production on one side of the
world can be halted because of issues relating
to component supply from the other side of the
world. Major car manufacturers, for instance,
have factories around the globe, but if they
depend on parts or components from within
an area affected by an incident, the inability
to procure these may significantly disrupt
production.
The risk consequences for the manufacturing
sector of a changing legal and commercial reality
further underline the supply chain imperative.
Regulatory proceedings and investigations
continue to make an impact in a crowded field
of potential litigation. In fact, a recent report
carried out by international law firm Fulbright &
Jaworski cites the manufacturing sector as the
third most at risk from investigation, only after
the healthcare and energy sectors.
Other risks with a part to play in destabilising
the supply chain include those from the
economic, social or political spheres, as is
evidenced through the consequences of global
economic fragility and political instability or
social unrest. Energy risks also fall into this
category, where it relates to power continuity.
Supply chain continuity is also exposed to such
threats as cyber risk or other IT failure. Making
the link, therefore, with wider risk and business
continuity planning is vital for a comprehensive
attempt at achieving resilience.
With the majority of world trade now moved
as marine cargo, a significant portion of global
supply chains are at risk from port closure and
diversion, or customs-related delays. Before
entering into international relationships, it is
worth creating a contract risk management
strategy for dealing with any potential disputes,
which may include product liability and recall
issues, as well as recovery disputes.
An emphasis on just-in-time deliveries only
exacerbates this issue. Some organisations find
near-sourcing a solution to this problem, which
cuts transport costs and emissions, avoids
foreign-exchange fluctuations and facilitates
face-to-face meetings with suppliers.
The supply chain has become a truly global
affair. As Helen Devery, head of the corporate
risks team at Berrymans Lace Mawer LLP
explains: “Consider the diverse countries
which formed part of the A380 Airbus supply
chain and the network created by that feat
of manufacturing. It is clear that businesses
increasingly rely on global relationships. This
can create great opportunities for them to trade
in a worldwide market and to equally seek
competitive products for their own supply chain.
It can also create liabilities that are complicated
by different legal jurisdictions and approaches to
risk control.”
Finding suitable ways to protect the network
of businesses that are most critical to your own
is not always straightforward. Several industry
organisations have developed methods for
supply chain risk management including SCOR
and ISO certifications.
Without assurance in the supply chain,
businesses are operating with unacceptable
levels of uncertainty. Further, a limited resilience
and capacity to bounce back following an
incident serves to amplify the risk and prolong
downtime. Chain reactions through the
supply chain are indeed unpredictable and
not directly proportional to the size of the
original trigger.
Effective supply chain management
helps the business to understand its risks
and gain the benefits associated with
standardisation and operational efficiency.
Further, when a critical supplier fails, the
impact is greatly reduced and often completely
eliminated, through the businesses ability to
see gaps and prioritise accordingly. Two-way
information sharing with supply chain partners
will further bolster network risk visibility. A
multi-tier scenario approach to planning, with
its greater levels of complexity, will also unearth
otherwise hidden problems. And in the spirit
of continuity, effective reporting
to upper management will help
maintain the resource needed
to keep effective supply chain
management at the top of the
board agenda.
Making the linksManaging the risk of supply chain interruption is vital, and no more so than in the manufacturing sector
sponsored by
News & Analysis l [ ]
FM-Global-touchpointsApril2013.indd 3 27/03/2013 15:38:14
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
3
Resilience
january 2015cirmagazine.com
News & Analysis l Editorial l Features[ ]
sponsored by
Over the last twelve months, CIR’s Special
Reports for Touchpoints have covered
a wide variety of business risks and
opportunities, and made the case for proactive risk
mitigation across a number of risk areas – among
them technology risk (the Internet of Things,
nanotechnologies, cyber risks) and climate and
environment risk (natural hazard management,
catastrophe insurance, greening). Together and
separately, these issues continue to directly
influence the way organisations operate – for
better and for worse.
As organisations navigate through the coming
year, aptitudes and attitudes towards resilience will
be a major defining factor of their success.
So, what should organisations be looking to
achieve in 2015? How can they learn from what
we know to be resilient behaviours and activi-
ties? What does resilience even look like? Well,
according to FM Global’s benchmarking tool and
repository on nations’ resilience to supply chain
disruption, which has been designed to help
organisations make more informed decisions when
it comes to supply chain risk, resilience looks
snowy, mountainous and has a capital situated at
about 59.95° N, 10.75° E. Perhaps unsurprisingly,
resilience appears to look like Norway.
Interestingly, Norway has also been named the
most prosperous country in the world for the sixth
year running by the annual Legatum Prosperity
Index – which rates countries on how they perform
in areas such as economics, health, education and
freedom – underlining the broad marriage between
resilience and success. To boot, this oil-rich coun-
try had even proved that being resilient needn’t
mean sacrificing a commitment to being green.
In FM Global’s Resilience Index, contributors of
resilience to supply chain disruption include such
factors as economic (GDP per capita, political
risk, oil intensity – resilience to price and supply);
risk quality (natural hazards, quality of natural
hazard risk management and quality of fire risk
management); and the supply chain itself (how
well the country controls corruption, infrastructure
quality – perceptions of general infrastructure:
transport, telephone, energy; and local supplier
quality).
To return to Norway, this country currently
ranks as the country most resilient to supply chain
disruption. It is followed by Switzerland, which also
benefits from a high score in its ability to control
corruption and low exposure to political risk, its
extensive and efficient infrastructure and the
quality of its local suppliers. The success across
these three factors gives Switzerland a resilience
ranking brought down only slightly by its exposure
to natural hazards.
At the opposite end of the scale, high exposure
to natural hazards, has contributed to the Domini-
can Republic being the least resilient country to
supply chain disruption (despite a lower exposure
to political risk). Closely behind them, with similar
characteristics are Bolivia and Venezuela. Looking
ahead, real improvements in resilience will only be
made possible when, concurrently, economic and
supply chain factors are themselves ameliorated.
Some of the factors considered by the Resil-
ience Index are of course, not directly within an
organisation’s individual ability to control, but their
impacts may well be. What the index sets out to
do is to consistently measure countries’ and ter-
ritories resilience and vulnerability to supply chain
disruption. Companies seeking to understand and
establish resilient behaviours and processes
can use that analysis to help prioritise their risk
management and investment efforts over the
coming year – and turn this knowledge into action.
The scale of flooding across Europe last winter,
for instance, has left many rightly concerned about
a repeat performance. And while the weather
cannot be controlled, there is much businesses
can do to address the risk. An FM Global study of
the effects of flood damage on businesses over
a 10-year period showed that companies with no
response plan, or an ineffective plan, suffered
an average gross loss of £2.1 million as a result
of flooding. For those that did have an effective
response plan it was £600,000, a 71 per cent
reduction, and a fitting return on investment.
One of the key emerging characteristics of re-
silient thinking is indeed that of proportionality, and
this is reflected throughout this analysis. Resilience
is the organisation’s ability to resist the shock or
negative impact in the face of a number of factors
– all of which are closely bound, and each with an
impact on the other.
Understanding this, and
establishing the appropriate
behaviours to counteract
it, will define the resilient
organisation throughout 2015
and beyond.
Are you on track for resilience in 2015?As organisations navigate through the coming year, aptitudes and attitudes towards resilience will be a major defining factor of their success. So, what should organisations be looking to achieve in 2015?
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
4
Incident management
november 2014cirmagazine.com
News & Analysis l Editorial l Features[ ]
sponsored by
It is widely accepted that companies with a
culture of resilience are better placed to avoid
potential crises and are likely to be more
successful in the long term. Recognising this
strategic priority, companies seeking to establish
resilience should aim to understand objectives
and priorities when it comes to incident and crisis
management.
A crisis ready organisation is one that can
reference and stick to core identified principles,
aligned with risks as identified in the risk register.
As Paul Robertson, director of business resilience
at PwC notes, “A crisis management response is
defined by your ability to understand your audience
and stakeholders and then reflect your values
in those relationships”. Robertson says among
the challenges around organisational leadership
is making sure that whatever you are capable
of doing is linked to the organisation’s defined
purpose, objectives and values. “Within any crisis
response situation, you can do a great many
things mechanically, but if they are not reflective
of the expectations of stakeholders or your values,
then you have to ask yourself if you are really
delivering what is needed.” This, he states, is the
basis of your relationship with your stakeholders,
and in some cases makes the difference between
continued business or otherwise.
Events themselves may take any number of
forms – externally driven, internally driven, and –
more often than not – operational incidents such
as IT issues, service failures – all of which can
grow into much more significant events given
the right environment. A report published by
the Business Continuity Institute and the British
Standards Institution suggests IT-related threats
are continuing to provide the greatest concern for
organisations, ranking above other threats such as
natural disasters, security incidents and industrial
disputes. Risk registers should also consider data
breach, adverse weather, interruption to utility
supply, fire, physical security incident, health and
safety incidents, acts of terrorism and new laws
or regulations. Further, the cyber threat has quite
fundamentally changed the way we must look
at incident, crisis and reputation management.
Organisations must therefore put in place plans
that recognise a world without cyber borders.
And while these operational risks are the most
common, there will always be the risk of the event
that arrives out of the blue – which, by their nature
have already developed into relatively severe
events by the time they come to light.
Learning from the successes and failures of
other organisations can make for quick gains when
searching for crisis instruction. In his book, Crisis,
Issues & Reputation Management, author Andrew
Griffin examines the challenging environment in
which crises and reputations are managed, and
analyses how incidents may be corralled so as to
avoid becoming crises. Indeed, Griffin maintains
that the reputation of an organisation influences
whom we buy from, work for, supply to and
invest in.
Some of the following incidents may, the author
points out, seem like “ancient history”, but many
have led to improvements within incident and crisis
management, helping to inform best practice today:
• Bhopal (getting to the scene of the incident);
• Piper Alpha (major incidents require media and
relative response capabilities);
• Exxon Valdez (if you don’t act, regulators and
politicians will);
• Swissair (families can forgive if you help them
remember);
• Pan Am (companies cannot be victims);
• Herald of Free Enterprise (never speculate);
• Deepwater Horizon (the spokesperson matters);
• British Midland (reputations can be built with a
good crisis response);
• Hudson River (crises need heroes);
• Texas City (crisis management is about actions
as well as words).
All of the above serve to demonstrate harsh
realities in a number of crises that need not
be repeated.
Establishing leaders to deal with incidents
and crises is central to success in incident
management. This year’s Crisis Management
standard (BS 11200) makes clear that crisis
management is a strategic issue that must be
owned and driven from the top. As maintenance
of plans occurs mostly at the management rather
than executive level, the standard has been
written to speak to both audiences. That
said, leadership must still continue to provide
the direction and vision of the overall goal.
The standard covers the core areas of crisis
management: core concepts and principles;
developing and building a capability, crisis
leadership and decision making, crisis
communications as well as training, exercising
and learning.
All these elements
can together help build a
capability to manage risks
with crisis potential and
manage and recover from
crises when they occur.
Averting crisis: A roadmap for risk managersIncidents and issues need careful strategic management if potential crises are to be avoided. In this article, we look at the steps risk managers can take to ensure their organisations can avert disaster
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
5
Nanotechnology
october 2014cirmagazine.com
News & Analysis l Editorial l Features[ ]
sponsored by
Nanotechnology is going to be big
business. Set to revolutionise business
and industry – most notably in medicine,
food and energy production, nanotechnology is the
single largest R&D investment that governments
are focused on.
Nanotechnology involves the manipulation
of materials and the creation of structures and
systems at the scale of atoms and molecules
or the ‘nanoscale’. The properties and effects
of nanoscale particles and materials differ
significantly from larger particles of the same
chemical composition. These tiny ingredients
have the potential to make a vast and positive
impact on society, with the potential to enhance
environmental protection, boost industrial
competitiveness, and, from electronic equipment
and cars to cosmetics and textiles, increase
resource and energy efficiency of industrial
processes and products. Thus far, however,
relatively little has been documented about the
potential negative impacts on the environment
and human health.
But that’s not stemming the proliferation of
nanotechnology. According to the Woodrow
Wilson International Center for Scholars, foods
containing nanomaterials are rapidly entering the
market at a rate of three to four per week. The
number of nanofood and beverage products has
grown tenfold in the last six years. A report, Tiny
Ingredients: Big Risks, published in May 2014 by
Friends of the Earth examined the science and
the number of reported engineered nanomaterials
in our food supply chain. According to the report,
in 2008 there were eight food and beverage
products found to contain nano ingredients. Today,
that number stands at 94. This analysis is based
on information documented in the Woodrow
Wilson International Center for Scholars’ Project
on Emerging Technologies Consumer Products
Database.
The Friends of the Earth report cites roughly
200 transnational food companies as currently
investing in nanofood and nano packaging and
are on their way to commercialising products.
The nanofoods market is expected to grow to
US$20.4 billion by 2020. An increasingly large
body of peer-reviewed evidence indicates some
nanomaterials may harm human health and
the environment. Nanomaterials have unique
properties that offer many new opportunities
for food industry applications, such as potent
nutritional additives, stronger flavourings and
colourings, or antibacterial ingredients for food
packaging. However, these same properties may
also result in greater toxicity for humans and the
environment.
In the US today, a large number of food items
consumed on a daily basis already contain
nanomaterial ingredients. These include familiar
products such as processed and cream cheeses,
chocolate products, oils and cereal. Nanomaterials
are also increasingly being used to package and
preserve fresh fruit and vegetable products, which
could threaten the integrity of staple healthy foods.
Due to a lack of required labelling and disclosure,
the number of food and beverage products
containing undisclosed nanomaterials is likely
much greater.
In Europe, regulatory changes look set to
bring more clarity when it comes to labelling and
disclosure. Food and drinks companies in the EU
could face more consumer claims as a result of
new food labelling regulations coming into force
later this year, which are designed to make food
labelling easier for consumers to understand by
streamlining and simplifying the current legislation
on food and nutrition labelling into a single EU
regulation. Under the new legislation, all food
businesses will be required to provide allergy
information on food sold unpackaged in catering
outlets and shops. Existing legislation on labelling
will include changes regarding the inclusion of
novel ingredients including nanotechnology in
pre-packed foods. This could drive increased
product liability exposure for a wide range of
businesses involved in the food production and
distribution chain.
Change is afoot when it comes to
nanotechnology and liability. In the medical
sector in the US, over 10,000 cases have already
been filed nationwide claiming product liability for
a DePuy hip replacement, following allegations
of excessive corrosion that could shed toxic
nanoparticles into the patient’s body, among
other complaints. Now that nanoparticles have
been identified as a safety problem, one can
expect these lawsuits are likely to have a
knock-on effect across a variety of sectors,
as well as impacting insurance and regulation.
Key to the success of nanotech is research
and debate. The nanotechnology community
has already begun an earnest dialogue with the
business community, and
a growing body of study
is being developed to fully
understand the opportunities
and risks in this fascinating
and fast-developing science.
Nanotechnologies: Small things, big businessFrom small beginnings, nanotechnologies are fast making their presence felt. Benefiting from the opportunities presented by nanomaterials means being fully cognisant of the risks
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
6
Resilience
september 2014cirmagazine.com
News & Analysis l Editorial l Features[ ]
sponsored by
Environmental risk is frequently found close
to the top of the risk management agenda,
with a growing number of companies
accepting the negative financial impact that
environmental risks can have on their bottom
lines. One of the reasons for this is the direct link
between environmental damage and the brand
damage that can occur in the event of an incident.
Then there is the potentially spiralling cost of fines
for environmental offences.
In the last few months, the UK has seen a
combination of Court of Appeal judgements
and a new sentencing guideline issued for
environmental offences, bringing with it new
and significantly greater levels of fines for such
offences, particularly for large companies.
In January 2014, a case involving a failure in
Sellafield’s nuclear segregation system involving
radioactive waste closed with the company being
fined £700,000. At the time, it was argued that the
level of fine was excessive, however the Court
of Appeal’s decision was upheld, reinforcing the
message that this is not an issue it takes lightly.
Since then, the UK Sentencing Council
issued definitive guidelines on the sentencing of
Environmental Offences, covering sentencing for
the unauthorised deposit of waste under Section
33 of the Environmental Protection Act 1990,
and illegal discharges to air, land and water. The
guidelines apply to all offences sentenced after 1
July 2014.
In terms of the impact that this latest change
to environmental law will have, that very much
depends on the size of the organisation in
question, and on the manner of the damage done.
A tariff divides company size into four categories:
micro – turnover less than £2m; small – turnover
between £2m and £10m; medium – turnover
between £10m to £50m; and large – turnover from
£50m. Culpability is divided into a further four
categories: deliberate, reckless, negligent and low/
no culpability, each with levels of seriousness.
By way of example, for a large company,
fines range from £7k for a low/no culpability
event to £3m for an incident that is deemed to be
deliberate. A very large company, whose turnover
greatly exceeds that of a company considered to
be large will be treated “proportionately” – a term
that is very open to interpretation, and thus poses
a degree of risk that is difficult to calculate.
Businesses in the UK are also increasingly
impacted by tougher regulation for environmental
offences from beyond its own shores. Under
Europe’s Environmental Liability Directive (ELD)
firms face civil sanctions for environmental
offences and any clean-up costs under the Polluter
Pays principle. And a recent European Parliament
decision to increase corporate transparency
has the potential to identify previously hidden
environmental risks, impact international climate
change negotiations and harmonise increasing
regulation by European Member States on
corporate reporting of non-financial information.
With potentially 6,000 European companies
affected, a number of organisations will soon
be required to include a statement in their
mainstream financial reports detailing their current
and foreseeable impacts on the environment.
A growth in public awareness surrounding
environmental issues, along with tougher
regulations and subsequent fines have put
environmental risk issues firmly in the spotlight.
The risk of brand damage and considerable
financial consequences represent two
compelling arguments for taking the
proportionate steps to
understand and assess the
complexities of environmental
risk regulation, and to
keep abreast of them as
they change.
Environmental damage and consequenceThe link between environmental damage and brand damage is irrefutable. Add to this the potentially spiralling cost of fines for environmental offences, and the case for proactive risk mitigation is made
In the UK the first systematic attempts to
control the polluting effects of the industrial
revolution were made by the Alkali Acts in
the 19th Century. Later legislation addressed
pollution of water and land. These laws to
control one problem have now become part of
complex laws which cover potentially the most
polluting industrial activities.
Since 1972 European environmental
legislation has increasingly shaped domestic
environmental laws. A series of single
issue directives were made but have
increasingly been replaced by “framework”
and “daughter” directives, which aim to
take a more integrated approach to
environmental protection.
Some UK environmental laws come from
international conventions and agreements,
seeking to regulate issues including climate
change, waste shipments and information
on participation in environmental decision
making, among others.
A guide to environmental laws
Source: The UK Environmental Law Association
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
7
Resilience
july 2014cirmagazine.com
News & Analysis l Editorial l Features[ ]
sponsored by
Logistics has always been about connectivity.
But today, that connectivity is intelligent like
never before – and if it is not, it certainly
should be. Modern logistics encompasses all
the links in supply chain: transport, warehousing,
inventory, manufacturing, wholesale, retail and
after service – everything that facilitates the
movement of goods and more. The logistics
sector is vital to the global economy.
Today, logistics and supply chain are not just
concerned with the physical movement of goods,
but also with information flows – now a major
focus in the sector. To keep pace, it is essential
that logistics is flexible, and, increasingly, more
intelligent. Enter the Internet of Things.
The term Internet of Things, or IoT, was first
coined by Kevin Ashton while working at Procter &
Gamble in 1999 as a way to describe connectivity
between physical machines – or ‘things’ – via
the Internet/network. And, while this connectivity
of components has been in existence for some
time in the guise of pervasive computing, it is
only now that pace is gathering in the way that
it is examined as a business enabler. It is worth
noting, that at the time of coining the term IoT,
Ashton was working on RFID, or Radio Frequency
Identification (wireless scanning) for the supply
chain, a technology that has long been supporting
the flow of goods and one that could well be
considered a stepping stone to the IoT.
Falling technology costs and developments
in complementary fields including cloud and
mobile are contributing to an uptake of IoT in
the consumer space and organisations are
beginning to take notice as they seek to find ways
of using it to improve business resilience. The
aforementioned Mr Ashton is now working for
US-based electronics manufacturer Belkin, whose
WeMo suite of home automation IoT products for
the consumer market is gaining strength after its
launch in 2012.
With this hyper-connectivity, new opportunities
arise. The key benefits to the logistics sector are
in service feedback and increased cooperation.
IoT integrates all the parties in the supply chain,
helping to connect weak links in the chains to
achieve seamless connection. Each action of each
participant is therefore made more transparent,
making logistics service integrated and rapid,
improving resilience and helping to avoid business
interruption. This in turn can help drive down the
costs of industrial and commercial activities, at the
same time as improving product flow.
Increased connectivity also means increased
security risks – even more so when human
intervention is necessarily lessened. The broader
the connection, the broader the risk. Extrapolated
to business, the risks can seem severe. A hack
attack on a consumer’s TV is one thing; hacking
into a vehicle’s safety system quite another. And
then there is the issue of data privacy. According
to the Economist Intelligence Unit’s (EIU) Internet
of Things 2013 business index: A quiet revolution
gathers pace, lack of trust and concerns about
data privacy are said to be hampering the take up
of the IoT at least in the consumer market.
There is a lot that is not yet known about the
IoT. But that’s not stopping it. As take up gathers
pace in companies and services, challenges
will be faced when it comes to regulation and
standardisation. A lack of know-how and skills
when it comes to the IoT will also need to be
addressed. As it currently stands, the only learning
taking place is of the successes and failures
of those companies who have already adopted
the IoT and begun to integrate it into their
business processes.
At the government level, logistics is at the
heart of UK Prime Minster David Cameron’s 2014
pledge of £45m to help develop the IoT, referring
to it as the new revolution, and a development
that will help make transport more efficient. This is
on top of the UK’s recent pilot, led by its innovation
agency the Technology Strategy Board, whereby
a project to create a smart transport and logistics
ecosystem was developed. And this is only the
beginning.
Meanwhile, in the business community itself,
interest does not appear to be completely matched
with investment sums, this does look set to
change. The EIU’s report, which was conducted
across the globe, suggests that a staggering
96% of organisations polled expect to be
using IoT within the next three years. And so
with the strides made thus far, we seem on the
cusp of a step change in this use of technology,
and it seems clear that
those companies that fail
to get to grips with IoT now
will risk falling behind those
embracing the future in
digital logistics.
The Internet of Things in logisticsThere are still a great many unknowns when it comes to the Internet of Things. But it has arrived, and the logistics sector is uniquely placed to benefit from all it has to offer, as long as it is aware of the risks
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
8
News & Analysis l Editorial l Features ]Resilience
june 2014cirmagazine.com
News & Analysis l Editorial l Features[ ]
sponsored by
The need for innovation in business is
not new, but an increasingly complex
and uncertain world produces new and
sometimes exponentially different challenges when
it comes to risk management. Forward looking risk
management approaches require an acceptance
of the need for change – for constant horizon
scanning.
Energy risksAmbitious targets often call for radical steps. As
diminishing reserves signal the end of North Sea
oil, the world is beginning to adapt to a low-carbon
future based increasingly on renewable energy,
creating a new and significant market for second
and third-generation renewable power generation
plants and technology. Renewable projects
are inherently risky and increasingly complex,
employing new innovative technologies, and, in the
case of wind and wave power, locating power-
generating plants further and further offshore.
Innovative insurance is pivotal to the future of
this industry – for infrastructure providers and
power generators, to governments subsidising
renewables, and the public and third-parties when
things go wrong.
Information risksIn the field of information security, the need for
vigilance and adaptation is often close to the top
of the agenda – if not at the top, with high-profile
data loss or theft reported on a daily basis, and
with often serious consequences. Examples
of best practice can be used as a benchmark
against which to measure preparedness for this
increasingly relevant risk. One such example
can be seen in the UK Cabinet Office’s recently
introduced information security classification policy
describing how to classify information assets to
ensure they are appropriately protected. The policy
applies to all information that government collects,
stores, processes, generates or shares. It is hoped
that this layered approach to information security
may be emulated across the private sector,
encouraging a better understanding of the value
and importance of certain data.
Systemic risksCatastrophic risks are no more apparent than
when it comes to natural disaster. There are
countless examples in history where catastrophes
have affected lives and livelihoods on a grand
scale. What defines catastrophic risks today,
however, is their increasingly complex and
uncertain nature, which gives rise to a pattern of
consequences that are far more difficult to predict.
Today, natural disasters could conceivably trigger
risks in combination with new technologies – as
demonstrated by the meltdown at the Fukushima
nuclear power plant in Japan by the March 2011
tsunami.
In a few decades, the emerging sciences
of nanotechnology or synthetic biology could
render feasible the creation of real viruses in
home laboratories. The Global Agenda Council
on Catastrophic Risks says this could be as
straightforward as it currently is to create computer
viruses on a home computer. As bleak as this
sounds, however, there are ways to prevent the
related risks, or at least to mitigate the impacts.
Research and innovation is the vital component
to this. The GACCR is encouraging the public and
private sectors to work together to address these
risks, which may only be effective with a vision,
strategy and commitment to more extensive,
consistent and systematic approaches at the
country, regional and international levels.
The risk functionThe risk management function should seek where
possible to position itself at the very top of the
organisation, so that when it comes to strategic
planning, a risk approach may be embedded
throughout the organisation. The last five years
have seen many larger organisations create a role
for a chief risk officer, reporting directly to the top.
All companies are different, so what works for one
won’t necessarily work for the other. Establishing
a process that fits in terms of reporting, resource
and, not forgetting, culture, is an effective starting
point towards making this work.
The risk function must also strive to keep pace
with the skills required to respond to changing
business dynamics, maintain relevance, and keep
ahead of the competition.
Embedding this innovative
and forward looking approach
into the risk management
function builds resilience
throughout the organisation.
Leading through innovationSuccessful risk managers are constantly looking for new ways to manage risk. Looking at emerging developments and techniques in other sectors can provide useful inspiration in this endeavour
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
9
News & Analysis l Editorial l Features ]Resilience
may 2014cirmagazine.com
News & Analysis l Editorial l Features[ ]
sponsored by
Over the coming decades, an increasingly
wealthy, urban and interconnected world
will result in unprecedented opportunities
and significant threats to manufacturing
businesses.
Management of supplier risk has come into
sharp focus as a result of the downturn. A report
carried out by KPMG and the Economist Intel-
ligence Unit cites a tendency to avoid potential
problems altogether, or diversify around them,
rather than to understand the risk. This, the report
points out, can mean companies lose out on op-
portunities, such as tapping into the R&D potential
of China. The same report says the geography of
sourcing, a combination of the global and the local,
is in flux as companies consider the appropriate
link between customer and supply chain location.
The goals and metrics of the future manufac-
turer will change. They will be faster, more agile
and will have a greater degree of cross-region and
cross-sector collaboration. More innovative use of
buildings and space is also likely to be a feature of
tomorrow’s manufacturing business. Process and
practices will need to become more flexible, with
closer customer relationships and cross sector
R&D. Overall, the culture will be more open,
creative, networked and interactive, attracting
multi-skilled staff.
Technology will play a central role in driving
change in manufacturing. In its 2013 report, The
Future of Manufacturing: a new era of opportunity
and challenge for the UK, the Government Office
for Science anticipates that while some future
value will derive from completely unanticipated
breakthroughs, much can come from already
established or emerging technologies.
According to McKinsey & Company, the new
era of manufacturing will be marked by highly
agile, networked enterprises that use information
and analytics “as skilfully as they employ talent
and machinery to deliver products and services
to diverse global markets”. Among the most
important pervasive technologies are informa-
tion and communications technologies, sensors,
advanced and functional materials, biotechnology,
and sustainable/green technologies.
Secondary technologies for future manufactur-
ing will include big data and knowledge based
automation, the Internet of Things, advanced and
autonomous robotics, 3D printing (additive manu-
facturing), cloud computing, and mobile Internet.
Looking ahead to 2050, the same report
suggests the most likely convergence of environ-
mental trends, which will lead to manufacturing
activities becoming more sustainable and resilient.
Population growth, urbanisation and climate
change (affecting supply chains and emissions)
are among the mega-trends cited. An increase
in demand for water, energy, land and materials
will also play a significant part.
In terms of reactive trends, the pressure
to produce sustainable products will prompt
manufacturers, if it has not done so already,
to employ more efficient and resilient practices,
including minimised material inputs, waste
management, increased energy efficiency,
reduced water usage and improved efficiency
in land usage.
Further ahead, the report predicts that experi-
mentation with new systems will see products
being remanufactured, instead of becoming
waste, and new forms of value established that
associate products with sustainability.
Examples of innovation in sustainability can
already be seen across the sector. Caterpillar,
which manufactures construction and mining
equipment, diesel and natural gas engines,
industrial gas turbines and diesel-electric trains,
runs a remanufacturing programme that returns
products at the end of their lives to as-new
condition and seeks new ways to recycle and
reclaim materials that would once have gone
into landfills. And with its Service Exchange,
construction equipment
manufacturers JCB now
remanufactures around 1,650
parts to the same warranty
conditions as new parts
are offered.
The UK is a leading global manufacturer,
with a world class reputation in the
automotive, aerospace and pharmaceutical
sectors. Manufacturing employs over two
million people, contributes £140bn to the
UK’s economy each year, is responsible
for over 70% of UK R&D investment
and accounts for over 50% of exports.
Measures announced in the 2014 UK
Budget should only help businesses to
break into new, faster growing markets
and underpin an improvement in the UK’s
export performance. Source: CBI
Manufacturing risk – adapting for resilienceA changing world puts adaptation at the top of the agenda for tomorrow’s successful manufacturer – with technology and environment key focal points
Manufacturing: In figures
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
10
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
11
News & Analysis l Editorial l Features ]Resilience
March 2014cirmagazine.com
News & Analysis l Editorial l Features[ ]
Globalisation appears to have more
doubters than it does supporters.
It has widely been associated with
rising inequality between and within countries,
and allowing rich nations to move domestic
jobs overseas where labour is much cheaper.
Unsurprisingly, the recent global financial collapse
has done globalisation’s brand no favours.
On the other hand, the global exchange of
knowledge and trade around the world has
brought a great many scientific and technological
benefits, and has also enhanced the lives of many
from a cultural point of view. From an economic
standpoint, the United Nations even reckons that it
may contribute to the eradication of poverty in the
21st century. Others would argue it has done quite
the opposite already. Whether or not the benefits
outweigh the downsides, businesses cannot
afford to ignore globalisation and its impact on
organisational risks.
Globalisation is not a new phenomenon, but in
our now hyperconnected world, the confluence of
physical and virtual proximity has brought about
a new risk dynamic, one that shares none of the
characteristics of traditional risk boundaries, and
which transmits much further, more rapidly and
in previously unconsidered directions. This new
interconnected nature of the global marketplace
means the consequences of events spread
rapidly across sectors and borders, often with
second- or third-order impacts that are difficult,
and sometimes impossible to predict. The 2003
SARS outbreak, for instance, cost businesses
US$60bn – or about 2% of East Asian GDP. This
also serves to illustrate how the health and safety
of the workforce is such a complex challenge in
the globalised economy.
The World Health Organisation estimates
that more than 900 million international journeys
are undertaken every year. Global travel on this
scale exposes many people to a range of health
risks. And as some businesses shift towards
emerging and riskier markets, taking the right
precautions to protect people requires closer
attention. Many of these risks can be minimised
or mitigated with the appropriate risk response.
Establishing guidance for different jurisdictions
will need to account for local risks and concerns
at destination, as well as pre-trip planning to
identify hazards and threats to particular workers.
These may range from simple health checks
and immunisations to more complex analysis of
the risk of corporate kidnap. Large multinational
organisations may also need to have in place
processes to look after dependents, or, in the
case of large charities, for instance, networks of
volunteers – wherever they may be, and at any
given time.
Global networks have made next door
neighbours of organisations and departments
that are physically thousands of miles apart. The
IT portfolios of large, multinational organisations
have been expanding seemingly exponentially,
and despite the many clear benefits this brings,
it can mean an array of vulnerabilities when
it comes to data. Today, data loss brings with
it increasingly heavy penalties and global
organisations must find a way of streamlining
processes to deal with regulations such as the
forthcoming EU Data Protection regulation, under
which formal risk assessments must be carried
out, with all private organisations with over 250
staff, and some smaller high risk data businesses
required to appoint a data protection officer.
While implementation may not come into force
until early 2017, many large multinationals will
want to begin working on this now. Beyond duties
to protect personal data, vulnerable technology
means vulnerable intellectual property, distribution
networks or indeed any other factor that makes
up the enterprise network. In this environment,
physical events can have an impact far beyond its
origins.
In an increasingly connected global economy,
business and society will continue to be affected
by events, irrespective of location of the original
impact. The devastating Tohuku earthquake of
11 March 2011 had knock-on impacts for global
companies including Toyota and Sony, both of
which were forced to halt production. The way
supply chains are managed in the global market
can mean the difference between success
or failure for organisations that have put their
proverbial eggs in one basket.
At the heart of risk management in a
globalised business setting is the understanding
that one single incident can have many impacts
far and wide. Individual organisations
are beginning to measure the impact of
mismanagement of risk on reputations through
stock price fluctuations, and the relationship
is stark. As such, there is an increasing trend
towards an enterprise-wide approach to managing
risk, commonly with a chief risk officer reporting to
the chief executive officer, allowing for a
more holistic approach to
risks, the assessment of
which, in well run firms, is
now a formalised process
carried out annually, quarterly,
monthly or continuously.
sponsored by
Rethinking global riskAt the core of effective risk management in a globalised business setting is the understanding that incidents know no borders
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
12
News & Analysis l Editorial l Features ]Resilience
February 2014cirmagazine.com
News & Analysis l Editorial l Features[ ]
A mounting interest in green building
among politicians and the public is
hardly surprising, given the make-over
‘greening’ represents for governments and
corporate brands. But that’s not the only benefit
to going green. Lower operating costs due
to energy efficiency and water use, reduced
carbon footprint through lower greenhouse
gas emissions, potential tax benefits, improved
worker sustainability and better health among
staff are all cited among the upsides, on top
of that squeaky clean image that going green
begets.
Canadian organisation the British Columbia
Construction Association (BCCA) believes the
most significant influencer, however, in green
building in the commercial and industrial sector
could be government adoption of mandatory
compliance with third party rating systems
on public projects. Many governments are
increasingly including LEED (Leadership in
Energy and Environmental Design) or equivalent
requirements on new public construction and
providing other incentives to promote green
building. Probably the most recognised standard
in the green building space, the 14 year old
LEED framework, designed by the United States
Green Building Council, has even become law in
some US states.
Whatever the impetus – green is exactly
where the construction industry is going.
Research by analysts forecasts growth at
varying paces over the coming years, to as
much as 20% growth in demand for green
building materials alone to 2017, with exterior
products such as energy-efficient windows and
green roofing expected to make up the largest
part of this (Freedonia Research). And while the
UK lags behind the US when it comes to green
building, government efforts to address this are
rarely far from the headlines. The Confederation
of British Industry says green technology and
services currently deliver a trade surplus of
£5bn. By 2015, green growth is expected to
halve the UK’s trade deficit.
But it’s not easy being green. According to the
BCCA one of the largest risks on green projects
is a lack of awareness of potential claims related
to contractual agreements that expose a party
to more risk than initially anticipated. Use of the
wrong material or inadequate techniques may
also harm the green ideals of a project. This is
particularly important where sub-contractors
are in place. Education has an important role
to play in this regard, as more and more green
building projects get underway. Furthermore, if
steps required to attain green certification are
not known by all parties, certification may not
be attainable, and in some cases, mandates
regarding LEED certification and other
regulations can even give rise to various legal
liabilities. New, more environmentally-friendly
materials must also be thoroughly tested to
ensure they can withstand the impact of major
earthquakes, hurricanes and floods, for instance.
That said, green building projects and
techniques tend to represent a lower risk overall
than traditional buildings, and that’s good news
when it comes to insurance. Green buildings are
resilient buildings, and discounts are justified
by linking reduced emissions with damage
mitigating behaviour. Since the first commercial
green policy was offered almost a decade ago,
availability of green building insurance has
grown rapidly.
It is not hard to see why. Green buildings are
designed with the latest specifications for electric
systems, heating and air conditioning systems.
They go through rigid commissioning processes
and are highly efficient. Since commercial
property losses most frequently come from
electric fires, heating and air conditioning fires
and plumbing leaks, state of the art green
facilities are considered comparatively low-risk.
The World Bank Group sees specific
opportunities for green building in commercial
offices, healthcare, education buildings,
retail spaces, supermarkets and hotels, with
interventions including treatment and reuse
of waste water, efficient heating and cooling
equipment and insulation all to have a high
impact.
Green is going virtually everywhere. And
in doing so, a burgeoning market for products
and services is opening up. Looking ahead,
industry portal, Sustainablebusiness.com
sees the focus of the green building industry
changing from new buildings to greening
existing buildings, as well as
green buildings increasingly being
managed in the cloud, enabling
automation in the management
of facilities through wireless
controls.
sponsored by
Going for greenWith interest in green building rising fast and a burgeoning market for green services growing around it, what are the risks?
News & Analysis l Editorial l Features ]Resilience
april 2014cirmagazine.com
[ ]
The retail environment is changing faster
than ever before. A combination of
factors behind these changes makes
for a challenging risk environment. In the UK,
the retail sector is the largest private sector
employer, employing three million workers.
Figures from the British Retail Consortium
(BRC) put total sales in the UK retail sector
alone at £321bn for 2013, which is 20 per cent
of the country’s GDP. £32bn of those sales
were online.
Technology risksThe way retailers are using technology is
evolving rapidly and profoundly changing the
business, with digital innovations increasing
the customer experience while streamlining
business operations. Retail brands are
increasingly learning how to leverage digital tools
to drive sales. Retailers can also use mobile
technologies and hypertargeting through big
data and social media to leverage a burgeoning
quantity of behavioural and attitudinal data on
digital users to better target their advertising
campaigns. Other innovations include
geofencing, in-store wifi and augmented reality.
These and other technologies allow brands
unprecedented market penetration, enabling
them to keep ahead of the competition and
exceed customer expectations.
Alongside the opportunities offered to the
sector through technology, retailers must
face the new digital risk reality and embrace
the proportionate IT security to protect the
customer base, avoid litigation and penalties,
and guard market share and reputation. The
last few months alone have seen a number
of well known retailers suffering some of the
most severe data breaches ever seen in the
sector. In January 2014 it was revealed that
US retailer Target suffered a breach where
the data of an estimated 70 million customers
was compromised. In the UK, Tesco recently
announced a breach affecting around 2,000 of
its loyalty card customers.
An increase in online shopping numbers
also creates systemic risks in other areas of
the business. This can be seen in the rise of
transportation incidents, as more deliveries
mean a corresponding increase in the risk of
accidents and potential litigation.
Bricks and mortarFor all the buzz around technology in retail, the
traditional high street risks are ever present. In a
global context, the retail sector was significantly
affected by terrorist attacks throughout the
course of 2013, with over a third of attacks
globally impacting on the sector, according to
figures from Aon Risk Solutions.
Following the events of September 2013
in the Westgate shopping centre in Nairobi,
premiums for terrorism cover increased by
between 10 and 20 per cent as demand for
the cover surpassed uptake of insurance
against political violence. Terrorism remains
a variable threat in the Eurasia region, with
Russia and Turkey the most affected throughout
2013. Japan, Mozambique and Bangladesh
have also seen increases with the latter
witnessing civil unrest over 70 days of strikes
and accompanying protests, particularly against
low wages and poor working conditions in the
garments industry
Adding to the issues affecting the retail
sector, the impact of volatile weather on profits
is increasing around the world - and not just
from extreme events. Even minor fluctuations
in expected weather can impact on business
performance. Weather risk management
solutions and supply chain diversification can
both play a part in addressing this risk. Another
hedge against sudden unavailability of inputs
is to maintain an excess inventory of finished
products.
Emerging risksA proactive approach to anticipating future
challenges will red flag any emerging risks.
These include, in the fields of science and
technology, emerging risks associated with the
potential toxicity of nanomaterials and the impact
of 3D printing. Meanwhile, regulatory risks
including import and export should never be far
from the radar. In the UK, the government has
pledged to reform business rates by 2017. The
BRC is expected to publish its recommendations
for the overhaul of the business rates system,
which may include such radical
proposals as the abolition of the
current system and an increase
in VAT – which would affect high-
street retailers and e-commerce
businesses alike.
sponsored by
Risk in the retail sectorThe retail environment is changing fast. Technology is profoundly impacting the sector, but the traditional risks still apply
FM-Global.indd 3 3/19/2014 1:39:17 PM
Sponsored by