Aon Global Risk Consulting – Alex van den Doel / Rubert N
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Aon Global Risk Consulting – Alex van den Doel / Rubert N

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Aon Global Risk Consulting – Alex van den Doel / Rubert N




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Presentation on theme: "Aon Global Risk Consulting – Alex van den Doel / Rubert N"— Presentation transcript:

Slide1

Aon Global Risk Consulting – Alex van den Doel / Rubert Nieuwenhuis

VimpelCom – Ramon TolkDACT8 November 2013

Business Continuity Management

Do you know the impact of business interruptions on your companies' financial performance?

How to enhance your risk management function by implementing BCM

Slide2

Why Business Continuity Management matters

1

Ship route Suez Canal essential for international trade

Slide3

Stress Testing your continuity risks – approach

2

What (extreme) scenarios can jeopardize your financial objectives?ApproachDefine risk bearing capacityDevelop scenariosIndustry specificOrganization specificOut-of-the-box Quantify impact of scenariosEvaluate against risk bearing capacity

Slide4

Stress Test – Risk Bearing Capacity

Information from financial statementsBalance sheet total: 880MEquity: 330MSolvency ratio = 38%

Claim of 50M will lower ratio to 32%

An impact of 28M will lower the ratio to 34% → RBC = 28M

Covenant in financing arrangement specifies a threshold of 34%

39 %

38 %

37 %

36 %35 %34 %33 %32 %31 %

Breach of Covenant!

Slide5

Source

:

Aon Global Risk Management Survey 2013 - 1.415 respondents representing a broad range of industry sectors in 70 countries (64% > 1B turnover)

Perception of business continuity risks

4

Slide6

Impact on financial performance

An average impact of 25% on shareholder value and an impact whichcommonly lasts for two years!Historically, supply chain disruptions canlead to an average of 9 percent lower sales and 11 percent higher costs!Both physical and non-physical events drive supply chain disruptions, and 85%of companies reported disruptions in2011 (study of BCI in 2011)Other recent examples:

5

Source:

Vinod Singhal, Professor at Georgia Institute of Technology, and Professor Kevin Hendricks, Richard Ivey School of Business, The University of Western Ontario, London, Ontario N6A-3K7, Canada

Company

Event

Value

Reaction

TEPCO

Japan EQ

-89.6%

- $ 37bln

Dexia

Greek debt

-87.3%

- $ 3.9

bln

Research

in Motion

Service Disruption

-49.7%

- $ 6

bln

BP

Explosion / Oil

spill

-29%

- $ 53

bln

Apple

Iphone

Antenna

-2.4%

- $ 6

bln

Slide7

Objectives

Protecting your financial performance from the impact of business interruption risksUnderstanding methods and techniques to map supply chain interruption risks and quantify the financial impact on revenue generating activitiesEnhancing Enterprise Risk Management by implementing Business Continuity Management and focus on high impact exposuresEvolving the Risk & Insurance function towards a more mature operational risk management function

6

Slide8

Agenda

Analyzing the impact of business interruption exposures on financial performanceBusiness Continuity Management - ExecutionLink BCM – ERMBuiness Continuity Management ProcessQuantifying financial impactBusiness Continuity Management – In PracticeCase study VimpelCom – Peter den DekkerQuestions

7

Slide9

What is BCM

"BCM is the ongoing process of identifying continuity threatening risks and defines a program for mitigating those risks and recovering as soon as possible within predefined time objectives".

8

Structured programme

and process

Slide10

How does BCM link ERM?

9

BCM is becoming more and

more a strategic topic!!

BCM is the key mitigation for

continuity risks

Slide11

BCM Process

10

Slide12

Quantifying financial impact - Business Impact Analysis (BIA)

BIA provides a very structured and efficient approach to:Identify and quantify business interruption risksMap complex and global supply chainsMeasure the value of current mitigation measuresBIA enables organizations to consolidate the BIexposure from unit level to every consolidated level (country, regional, global, etc.)The BIA provides a solid basis for risk management improvement:Clear picture of the biggest interruption risks, accumulation effects and critical issuesFocused development of risk management strategies (loss prevention and response) Optimization insurance cover and limitsEnhancing business interruption risk awareness and understanding

Slide13

Step 2: Example of results of quantification unit level

Sup

ply chain analysis

Dataroom

analysis

Site analysis

Slide14

Step 2: Quantifying consolidated level

Delivering two key elements:Dependencies networkBased on unit level outcome defining and modeling material dependencies between suppliers, own units and customersMaking use of a "engine" to simulate impactConsolidated risk profile on selected levelCalculating the impact of unit level events though dependency networkCreating consolidated loss exposure profile on selected level