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An Overview Of Risk Management
By
Sep 1, 2009, 15:57
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AN OVERVIEW OF
RISK MANAGEMENT

BY HON. HAJA AFSATU O. KABBA CHARTERED INSURER
AWARENESS RAISING EDUCATIONAL SEMINAR ORGANISED BY AFCON RISK MANAGEMENT AND GENERAL SERVICES CONSULTANTS LTD.

THEME: "Risk and Human Behaviour" at the Miatta Conference Centre, Youyi Building Brookfields

on Tuesday 14th December 2004 at 9:00 a.m.

Mr. Chairman, Minister of Finance, J.B. Dauda, Mr. Speaker Justice E.K. Cowan, Leaders of the Majority and Minority Parties in Parliament, Hon. R.E.S. Lagawo and Hon. Ernest Bai Koroma, respectively, Cabinet Ministers and Colleague Parliamentarians, Members of the Diplomatic Corps, Participants all, Distinguished Ladies and Gentlemen, I welcome you all.

I want to, first and foremost, give special thanks to the Commissioner of Insurance, Mr. A.A Kanu, for his untiring effort and commitment to this one-day seminar on topics that are pertinent to the development of the Insurance Industry. I also want to thank the Government of our beloved country, Sierra Leone. We are indeed breaking new grounds -insuring of Government Assets. I congratulate the government for taking a bold step in the right direction.

Human beings, I believe, exist at different psychological levels and that these levels find expression in the values the individuals attach to many aspects of life including work. There is therefore a need for this type of seminar to enhance the awareness of civil servants of the essence to preserve, protect and manage even what is insured. The Theme: "Risk and Human Behaviour" indicates that risk management, like development, is very much concerned with people, their relationships and the ability to create and sustain such relationships. This is the essence of effective Risk Management.

Going through the various topics that will follow the Formal Opening, we will come to realize that "Government" as a concept, is in itself an intangible entity that is personified by us, the totality of the citizenry. That is to say that "Government" is not a matter of "we" or "them", but a totality of all. That is, "we" and "them". In order to make any advancement both the "we" and "them" have to come together as one and move in the same direction. The "we" cannot be wanting and doing something else away from the "them". That is a recipe for chaos and backwardness. Thus, there has to be constant group exchanges - public, private, partnership etc. This indicates that risk management is indeed a shared responsibility.

Textbooks are full of varying definitions of risk management. A working definition is, however, proffered here. Risk management is the identification, analysis and economic control of those risks, which threaten the assets, or earning capacity of an enterprise. It also means maintaining and protecting the occurrences of losses. Simply expressed: "it is better to be safe than sorry". Risk management is therefore the foresight and wisdom to cut down losses, particularly, the insurable losses.

Risk management is for all those assets and risks, which are covered by insurance. Insurance covers only specific contingencies and make good only the intrinsic losses. Therefore Risk management goes beyond insurance by selecting various techniques to minimize potential hazards and monitors the implementation of pre and post loss control methods. Those who believe in it have discovered its benefits; a motivated workforce, lesser down-time, less strikes, better labour union relationships and increase in our national wealth - a blanket security translated into economic reality.

Mr. Chairman, some civil servants will still say that the government has taken out an insurance policy and there is no need to worry. Studies have shown that insurance covers only the tip of the accident iceberg. For example, how would you cover the trauma of a civil servant and his family who have gone through an accident, fire disaster or theft, mistrust created among workers leading to malicious damage, loss of goodwill and reputation. Imagine the loss that would be incurred by the country through the improper handling of petroleum and flammable objects, disposing of cigarettes in the office dustbin and causing a fire, improper handling of office keys leading to theft for which there is no forcible entry or exit, lack of proper training of drivers and maintenance of vehicles etc. etc.

Mr. Chairman, prevention, you will agree with me is better than compensation. True accident can never be totally eliminated, but risk management which enhances loss prevention or minimization, should be the first line of defence. This commitment must come from the top hierarchy of Government and should be given a priority in order to achieve a risk management conscious society.

Just listen to Mr. It wont happen to me.

"Accident? Sure they happen to all those unfortunate people out there, not me".

"In case of fire, I would hurriedly move my desk from the route of the fire and escape unhurt".

As long as people continue to wear these self-destructive blinkers, accidents will keep touching new heights in the workplace, on the roads and elsewhere. The rude fact that the majority of road accidents, fires, burglary and infidelity are attributed to human error, proves that they are man-made and are therefore preventable. Many fatal road accidents are reported every year. The same can be said of fires, thefts of money in transit, expensive donor equipment burgled overnight etc. The list is endless and put together could sum up to a colossal loss of lives and properties.

Can we afford such losses? Remember the 21st June 1975 storm that destroyed Fourah Bay College Buildings, fire at State Lottery Building; City Council, building near Pademba Road Prisons, flooding damages at Youyi Building (unlocked tap etc). Can we again stand by and watch such wanton destruction of government properties and our national wealth? Shouldnt these be prevented? The task is Herculean. Research shows that most of the tragedies are a direct result of ignorance, wrong attitudes, and gross negligence or absent mindedness. What is therefore urgently needed is an organized effort to shake the civil servants out of their apathy, to educate them on the cause and magnitude of these tragedies and cultivate a sense of safety habits. This is precisely what AFCON Risk Management Consultants has been doing since the year 2000 when it was launched by the former Minister of Finance, Dr. James Jonah, an occasion that was ably chaired for two days by Justice Laura Marcus Jones. The ultimate mission was the creation of safe and enabling environment to work and to live in.

Mr. Chairman, Majority Leaders, Ministers, Parliamentarians, the Diplomatic Corp., participants all, Governments first obligation is to protect the lives and properties of its citizens. Risk management, which contributes towards the protection of the nation, should be given support by government. I would recall that H.E. the President, Alhaji Dr. Tejan Kabbah, did mention, in his congratulatory letter to AFCON Risk Management and General Services Consultants, Governments commitment to work with this very important institution. AFCON is looking forward to that cooperation.

We are looking forward for Government to contract the enabling legislation with emphasis on risk avoidance or reduction. For example, providing an efficient fire fighting force, compulsory use of fire extinguishers and detectors, burglary and intruder alarms in government offices, set up minimum standards for working environments; and effective legislation on the protection of the environment.

Risk Management is important as a vehicle for the prevention of losses and the protection of national assets. All Sierra Leoneans, including the Government, must support risk management measures as a matter of national and corporate policy. Government should wake up to the risk posed by society because, as I have already mentioned, replenishing damaged assets and its consequential loss can be costly and time consuming. Risk management helps to reduce the chances of accidents in the first place to enhance optimal use of scarce resources in other more important areas.

Mr. Chairman, we are now witnessing a changing pattern of risk in our society - war risks, terrorism, and political risk. The chief purpose of the defence effort is to act as an insurance against this happening. Does this type of risk cover government assets, building, equipment etc? Remember, the poor are the most at risk when it comes to protection against risks. Insurance is still by far the most effective risk transfer mechanism. Yet it is one of the least democratic. I must, however, hasten to say that risk management is not another word for insurance management, although like insurance, it is concerned with risks. Risks management deals with both insurable and uninsurable losses from a much wider perspective - prevention is better than compensation. The worldwide vogue is prevention - AIDS, Corruption etc.

Risk management training should be on-going and the litmus tests of its success are maximal involvement of the people. It should not be perceived as a programme for civil servant workers only. The "I" and "You" approach should be substituted by the "We" and "Us" spirit. Therefore the considered view point of a third party like AFCON, that can detect flaws in procedures and systems becomes necessary and that is where AFCON Risk Management training and education has proved to be effective and useful. Likewise, the insurance industry should never lose sight of the ultimate reason for its existence -service to the public in need of an efficient low-cost method of protection against unforeseen loses. The future is not predicted - it is invented. Insurance organizations no longer can stand aside and wait for the situations to settle AIDS, WAR, AGRICULTURE. The insurer that obtains a clear view of the existing needs, as well as a clear perception of how best to satisfy the needs, will be the insurer that would survive and thrive in the future. I call on the insurance industry to re-examine their missions, functions, products, organization and management style as these are in dire need of change from the traditional style.

The Government should endeavour to change their complacent approach to matters concerning loss control measures, accidents, population, safety laws, appropriate code and policy conditions on fire, works, health, driving restrictions etc. Insurers can join forces with SLICOM and AFCON Risk Management Consultants in organizing Risk Management sensitization programs such as this. Commercial and other Civil Societies like SLAJ, Motor Drivers Union; S.L Labour Congress, Medical and Bar Associations can all play an active role in the promotion of loss prevention and safety management. The Drivers Associations are already playing their own role and I commend them for that. But there is a need for active collaboration of all stakeholders - AFCON is there to be consulted at all times. AFCON is well aware that risk was never the subject of a lesson project or discussion when you were at school. NO! Most of you must have completed your schooling in an unreal environment, where events definitely happen or did not happen at all. Risk played no part. Little wonders that when we achieve adulthood it is difficult to separate the real from the perceived level of risks.

AFCON is calling for a greater political-will to lead the debate and educate the public to the realistic and acceptable level of risks. Ive yet to meet a politician who is willing to think through and defend against all corners - the Risk Management and Safety issues. All political Leaders do is to rush to be photographed at the scene of the latest disaster. "Whether they are doing the right thing is not so much relevant as whether what they ought to be doing is also getting to be done". They should be leading not just in the fields of environment but also in areas of safety, public authority, regulation and risk management education in order to overcome human errors which is often deceptively simple to make, yet desirously costly in consequence -Ignorance is a Big Big Risk.

In spite of all precautions, fire may strike. So we must be prepared and ensure that fire-extinguishing equipment are located for easy access and more importantly ensure they function properly. Hence the need for insurance portfolio is an important one and the holder of such a position is playing a very vital role. Selection of risks and buying covers is a specialized job and therefore demands a systematic approach. It is this contribution, which the insurer alone can make that establishes it as a separate economic activity. All other activities of insurance can and are performed by others. Banks and other financial Institutions invest funds; the police and other voluntary bodies study the prevention of losses and so on. But it is in the skilled occupation of rating risks to produce an equitable distribution into a common fund, that the insurer stands alone - a valuable contribution to the so-called invisible export of a country.

A reinsurance service, as well as peoples awareness of such services, is required in order to operate at the optimum level for the benefit of the people it seeks to serves. Thus to stop starving people by collecting their hard earned savings to feed the well fed brothers in the name of reinsurance, saving foreign exchange outflow.

The future of Insurance Industry, which is a growing concern, lives in the skill of her management personnel. I therefore congratulate the Principal Dr. Dennis Kargbo and administration of the Milton Margai College of Education & Technology for integrating insurance into their curriculum and also participating in all AFCONs Risk Management Awareness Raising programmes. I hope other will follow suit. In insurance, there is only one God and that is education and only one Evil, which is ignorance.

I also congratulate SLICOM again for their weekly insurance education programme over Radio UNAMSIL as they are helping to reduce ignorance; ignorance is a big risk. This is part of its regulatory work in order to reassure the insurance industry as well as the public that they are there to score desired objectives as well as providing a more professional insurance industry.

Mr. Chairman, the publics perception and confidence of Insurance Quality and supervision has taken a severe knock over the years. The insurance industry should regard the regulatory system as a professional protection in the same way as a doctor regards his or her registration as something to be prized and valued. This is risk management. The public wants to know whether the regulator is acting in their interest and the Insurance Industry desires to be assured that the Governments overriding aim of adequate protection for investors can leave the industry free to develop innovate products.

Insurance is an intangible product and information is a precondition for better standards. Therefore, effective regulation should provide a measure of reassurance about what is expected - fair dealing, clean market, good advice and reliable standards - effective risk management.

Regulation should not be substituted for common sense. A large sum of money will be paid out of the Nations Budget for insurance premiums; those dealing with such monies must be honest, efficient and competent.

Just as individuals have responsibility for their personal health they have one for their financial wealth also. Since the Government is the totality of all as I said at the beginning of my presentation, we are indirectly paying premiums for Government assets - our assets. Premium toward risks we cannot manage on our account.

Risk management can only be effectively undertaken by those who control the risks. Risk refers to future events, hence managing the future is without doubt more difficult than to argue about the past. The next step, therefore, is to seriously discuss the implications of risks, commit line ministries and implement real risks reducing techniques.

"As a nation, we can only realize its fullest potential if the Government, individuals and corporate institutional bodies wake up to the challenge that our society is increasingly becoming complex and that we can only forge ahead by adopting a serious and coordinated approach to Risk Management. To do otherwise will spell doom for this nation" said Hon. Ernest Bai Koroma in his presentation on Risk and Society at the two-days AFCON Event hosted in October 2000.

In view of all I have been saying, you would have noticed that Risk Management is not a one-off thing. It is an agreement of many principles more properly described as a function of many disciplines. The overview is intended to set the scene for what is to come for the remainder of the seminar.

I now leave you with ten points on Risk Management and Safety Management, which are the new ten commandments which you can pin up in your offices to follow daily. They are not meant to replace "The Law of Moses" but if you allow yourself to be guided by the tenets of these commandments, you will certainly help create an enabling environment for us to work and live in.

THE NEW TEN COMMANDMENTS:

1.THOU SHALT INTEGRATE RISK MANAGEMENT IN THY MANAGEMENT PHILOSOPHY.
2.THOU SHALT NOT DISMISS ACCIDENTS AS ACTS OF GOD.
3.THOU SHALT PROPAGATE RISK MANAGEMENT EVERY DAY.
4.THOU SHALT NOT RELEGATE RISK MANAGEMENT TO THE BOTTOM RUNG OF THY PRIORITIES.
5.BE COMMITTED TO THE HEALTH AND SAFETY OF THY EMPLOYEES.
6.THOU SHALT NOT POLLUTE THE ENVIRONMENT WITH DAMAGING AFFLUENT FROM VEHICLES AND PLANTS
7.THOU SHALT NOT HESITATE IN GIVING DUE IMPORTANCE TO THY RISK MANAGEMENT PROFESSIONAL AND HIS PROFESSION.
8.THOU SHALT NOT FLOUT THE SAFETY LAWS OF THE LAND.
9.THOU SHALT NOT SHIRK THY RESPONSIBILITY TOWARDS SOCIETY FOR THY OWN PAROCHIAL GAIN.
10.OBEY THE TEN COMMANDMENTS AND YOU WILL REDUCE YOUR RISKS.


By courtesy of AFCON RISK MANAGEMENT AND GENERAL SERVICES CONSULTANTS LTD (Copyright, December 2004)


© Copyright by Awareness Times Newspaper in Freetown, Sierra Leone.

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