Here we invite you to read the full version of the interview to Giovanni Roncaglia, our Global Business Manager, on Commercial Risk’s “Risk Frontiers Europe” report which features insights from Brokerslink’s many European Brokers, Partners & Affiliates.
Giovanni Roncaglia, global business manager at PCA Spa, a Brokerslink affiliate in Italy, spoke to Liz Booth about the challenges presented by Covid-19, particularly its impact on supply chains, and the knock-on effects for the risk and insurance industry.
“According to virologist Dennis Carroll, despite the world’s most industrialised countries having the resources and knowledge to face the new epidemic, they have suffered ‘an attention deficit disorder on a global scale’…”
A few years ago, I bought the book Spillover. After reading it, I was convinced that new pandemics would be inevitable, but I was also confident in our world’s prompt response to such an event; unfortunately I have had to change my mind,” Giovanni Roncaglia, global business manager at PCA Spa, a Brokerslink affiliate in Italy, told Commercial Risk Europe.
He warned that the way in which we actually approach risk often doesn’t coincide with the measures we should adopt, given the theories on risk and probability. “The aversion to ambiguity tells us that we prefer to take risks concerning familiar contexts rather than others based on unknown information,” he added. And Mr. Roncaglia said risk managers should be aware that the urge to invest in preparation is dramatically reduced when the threat is unclear and not present.
“According to virologist Dennis Carroll, despite the world’s most industrialised countries having the resources and knowledge to face the new epidemic, they have suffered ‘an attention deficit disorder on a global scale’,” he added.
But he said the insurance world has responded to the Covid-19 crisis relatively quickly. For example, Lloyd’s recently published some suggestions to help the insurance sector accelerate global economic and social recovery.
The Lloyd’s report – Supporting global recovery and resilience for customers and economies: the insurance response to Covid-19 – seeks to address the short-, medium- and long-term challenges that customers will face from the pandemic.
“Proposals include precautionary measures for potential new waves of Covid-19, building greater resilience that contemplates global supply chains, digital economies and precautions to mitigate upcoming catastrophes. To address the many complex challenges that lie ahead, the report defines three open-source frameworks, two of which require partnerships between state government and insurers/reinsurers. Two frameworks (ReStart and Recover Re) are designed to provide protection against further waves of Covid-19 or other future pandemics. The third one (Black Swan Re) aims at improving the company’s resilience against future systemic catastrophic events,” explained Mr. Roncaglia.
He believes the pandemic has highlighted many problems in supply chains. Companies that use supply chain risk management plans have had less repercussions and more controllable results, he added.
“Looking ahead, the focus will be on creating backup plans for the supply, with a shortening of the supply chain to make it faster and more controllable. The modern evolution of value chains has increasingly pushed companies to horizontalise their supply chain, delegating increasing parts of their core activities to many-level suppliers, capable of achieving considerable economies of scale or purpose,” he said.
“The phenomenon of progressive globalisation involving even medium-small enterprises opening up to international markets, has also led companies to adopt global sourcing policies precisely to find those suppliers able to ensure those economies worldwide. Consequently, it is common to find companies where more than 80% of turnover might be made up of purchased materials, whose suppliers are located in very remote areas of the planet. These progressive transformations of supply chains, however, also impacted their stability, generating extra-long supply chains and therefore less transparency and less control,” continued the broker.
Mr. Roncaglia believes supply risk management might become a key tool for companies to predict possible scenarios in critical situations. “For example, analysing the risk of the country in which the supplier company is located may highlight not only the need for a backup supplier, but also the necessity to perhaps activate other partnerships, either local or international,” he said.
In the face of Covid-19, Mr. Roncaglia noted that companies that have adopted tools to monitor their supply network have been able to quickly meet and avoid disruption, thanks to complete and clear knowledge of their supply configuration. “On the contrary, companies that won’t introduce tools like that within their organisations might have to allocate significant time and resources to understand what impacts and damages have been caused during a lockdown,” he added.
“To deal with the post-emergency and the new normal, companies must redesign their product and service supply chain. The supply chains could become less global and more local, to ensure greater speed and, most importantly, transparency and control. Supply chain continuity will be essential, and short supply chains are faster, more transparent and more predictable,” he continued.
Mr. Roncaglia said the Covid-19 crisis has forced brokers to rethink an important part of their job. “I am especially referring to the contact with clients, often limited and taking place through online meetings and telephone communications. Nevertheless, it is crucial to continue to ensure the quality of the consultancy service,” he explained.
“The advice of a broker in this emergency situation is essential to guide customers in mitigating the risks that have emerged and to advise them on choosing existing and new insurance coverages that are best suited for the transfer of residual risk. Continuous study and information are now more than ever needed to detect and evaluate proposals that the most reactive companies will place on the market, and to rationalise the proposals and regulatory interventions in the insurance sector,” he added.
(Source: Commercial Risk Europe, Vol. 11, September 2020)