Times of crisis can cast a long shadow for risk managers. Cristina Martínez, director of corporate risk management at Spain’s Campofrío Food Group and a member of the FERMA board, explains to Rafael Sierra how the downturn has changed approaches to risk management.

The economic crisis has brought with it many changes to the risk landscape. Yet the objectives pursued by corporate risk management are the same: aligning strategy and risk appetite; protecting reputation, investments and key projects; and helping the business to optimise efficiency.
If the goals are unchanged, then what has been the effect of spending cuts? “Departments are reviewing costs and optimising resources to concentrate on business-critical objectives or projects,” Martínez says. “At Campofrío, we continue to carefully assess each decision on how much insurance to buy and what we should choose to buy to cover our own risk exposures.”

Cristina Martinez

Cristina Martinez


Out of crisis
Risk management departments can be a good place to measure the practical consequences of any crisis. The food sector has yet to see an increase in insurance claims by businesses, Martínez says. However, she warns that “a sustained reduction of investment could obviously generate an increase in claims, if it is not accompanied by a plan to limit claims and appropriate risk-awareness culture.”
Analysis of the risks a company faces should be as simple and practical as possible, she says – key people can then exchange opinions and share experiences when identifying
and assessing risks. It is also fundamental to convince the organisation that they need a risk map as an effective decision making tool: “The key to combining security and insurance is a solid culture of loss prevention sponsored by senior management, which should be followed by a positive trend in claims over the medium to long term.”
Martínez stresses the importance of staying aware of emerging risks. Reputation, for example, is becoming more pertinent as the crisis uncovers scandals in sectors such as finance. “Reputational impact is not a risk in itself,” she says, “but a result of any type of risk getting out of control.”
Environmental risks have also increased as a result of regulatory changes, she notes, along with risks related to computer and internet security. The latter “are extremely complex to assess given the rate of change introduced by new technologies and the way we communicate”.

Tilting at windmills?
Turning to her home country, Martínez believes that Spanish businesses mostly recognise the added value of integrated risk management as a discipline or philosophy. But she says that there is still a long way to go: “The lack of maturity in this sense is more associated with how to manage a business than the actual activities the business engages in.”
This immaturity can be seen in reactions to major natural disasters such as the earthquake in Lorca or Cyclone Klaus, although she adds that the low exposure to natural hazards in Spain and the existence of the Insurance Compensation
Consortium (Consorcio de Compensation de Seguros) contributes too. Nevertheless, “there is a growing interest in continuity plans and crisis management.”
In the current context, the relationships between risk managers and insurance brokers are important. While these relationships are generally solid, Martínez warns that “the economic situation is making it necessary for all of us to clarify the division of roles and responsibilities so as to make the most of limited resources.”
Claims are a central issue. The Spanish risk managers’ association, IGREA, has developed a guide for good practice in claims to constructively add to an on-going debate about conflicts of interest in claims management.
“We are not inventing anything new, but information is collected in a structured way in order to provide a practical tool covering a set of standards and best practices in the management of claims, as a starting point,” Martínez says of the guide.
The growing global footprint of Spanish companies poses other challenges, according to Martínez. “The increase in international activity, in addition to regulatory change, reinforces the need for specific training required for managers of any organisation. All of us working in the Spanish insurance industry must be prepared to take on this challenge.”

Predictions for 2013
Looking ahead, Martínez says that insurance renewals at the end of the year will have been mostly flat, potentially to be followed by progressive hardening, depending on how reinsurance contracts are renewed.
Going forward, she stresses the importance of promoting the exchange of best practice between risk managers and fostering the development of integrated risk management as a corporate discipline in all industries. Clearly, these priorities sit well with her position on the board of directors of FERMA, Europe’s leading risk manager association, whose main role is to represent the interests of insurance buyers and risk managers.

“The key to combining security and insurance is a solid culture of loss prevention sponsored by senior management”

FERMA faces up to Solvency II
One of FERMA’s concerns is the future implementation of Solvency II in the insurance sector. Cristina Martínez, a member of FERMA’s board of directors, has expressed the importance, both to the European Insurance and Occupational Pensions Authority

(CEIOPS) and to the European Commission, of maintaining the balance between the protection of the insurance consumer, through higher capital requirements, and the competitiveness of European companies.

She warns that an increase in operating costs for insurers associated with new capital requirements could see premiums rise, and a possible concentration in the European insurance sector – with the consequent disappearance of some players in favour of consolidated insurance groups. This could lead to greater retention of risk, and a potential loss of competitiveness. She also notes that Solvency II could disproportionately affect some industries, impacting the availability of specific products or solutions, especially in non-life insurance.

Solvency II may also have implications for the captive insurance companies used by companies to design their global insurance programmes. Martínez believes that many of these companies could cease to operate under the current proposal, “which would reduce the capacity to finance risk for some European policyholders”. FERMA is reviewing capital requirements introduced by Solvency II for captives so as not to harm the competitiveness of European companies who use this risk financing instrument.

Regarding the future Directive on Mediation, IMD II, Martínez does not think it will cause a rise in costs in insurance programmes. “There is a need to regulate the relationship between corporate insurance buyers and intermediaries due to standards in the distribution of roles and responsibilities to ensure transparency in transactions and avoid conflicts of interest. The intermediary’s remuneration should correspond to services rendered.”

Cristina Martínez CV in brief
The day job: In addition to her international responsibilities at FERMA and IGREA, Cristina Martínez is director of corporate risk management at Campofrío, a Spanish multinational food company. At the StrategicRISK annual awards in London in 2012, Campofrío’s ERM programme was recognised as the best in the EU.

Experience: Before starting at Campofrío, she was head of corporate risk management at Iberia Airlines (2005–9).

Global view: During her time at Iberia, Martínez also dealt with Greece, the Baltic region, UK, Ireland, Central America and the Caribbean. Currently, Campofrío operates in Spain, Portugal, France, Belgium, Italy, the Netherlands, Germany
and Romania.

Academic qualifications: Martínez has degrees in economic science and actuarial and finance science from
Madrid institutions; a postgraduate marketing qualification from the Madrid Chamber of Commerce and Industry; and a diploma in risk management. She is now studying for a PhD in the subject.

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