The current global business landscape is facing a huge evolution. As the broad effects of climate change and the destructive calamities it gives birth to become more prevalent, there is a growing need for large businesses and multinational entities to be more responsible in their sustainability, all in the name of staying resilient.
It’s this paradigm shift that is the central theme for FM Global’s resilience index this year, highlighting the countries that have done most to correct inadequacies in their economic prowess, risk qualities, and supply chain resilience. It also put a spotlight on those who are trending to fall in the rankings; senior vice president and Asia operations manager Tan Hian Hong (pictured above) said that these are just a taste of things to come as the world at large faces stricter regulations towards a net-zero goal.
“As businesses transition towards a net-zero economy, they will have to implement sustainable practices that are in line with a jurisdiction’s regulations and consider solutions to improve their resilience against an ever-changing operating environment,” he said in conversation with Insurance Business’ Corporate Risk channel.
Singapore, which ranked second on the insurer’s index, is in the midst of major regulatory changes. Tan said that the actions and reactions of businesses in the country will determine how Singapore’s resilience will fare in the years to follow.
“Singapore is no exception, as the government has laid plans to achieve net-zero by 2050,” Tan said. “Businesses operating here are now required to incorporate sustainability measures, including reducing carbon emissions and enhancing or utilising renewable energy options. This means that businesses face new challenges to adapt to new requirements. This transition will foster greater business resilience through a focus on innovation and investment in new technologies that promote more sustainable practices.”
With that in mind, Tan said that FM Global’s approach to the current environmental impact being felt across the world involves a thorough and in-depth de-risking, a proposition that should be considered by firms who want to be more resilient in the coming years.
“Consistent with Singapore’s broad approach, we advocate taking proactive, preventive steps,” Tan said. “This ensures critical business infrastructure and property assets are resilient to threats posed by climate change, which will enable Singapore to continue being a resilient business environment, complementing its financial and economic competitiveness, stability, and robust governance.”
“Significant shifts in the next five to 10 years”
Massive regulatory changes are a fact of when, not if, and Tan said that companies will do well to respond to these changes to keep their resilience up. As is the case with almost everything business-related these days, these shifts will be driven by the continued development and adoption of the environmental, social, and governance (ESG) framework. Tan said that the developments in Asia will be worth looking at, primarily as it is the prime emerging sector in the insurance world and because China – the second largest insurance market next to the US – is in it.
“As the ESG bar rises, risk evaluation and approach to resilience will undergo significant shifts in the next five to 10 years,” he said. “The most resilient economies in the region – Singapore, Japan, Hong Kong, and South Korea – are constantly striving to improve their risk quality and seeking ways to maintain their competitiveness in an evolving landscape that is dominated by climate and economic concerns. Other nations such as China, India, and neighbouring Southeast Asian countries, currently dominate the mid-sections of our Resilience Index – indicating significant room for growth in the mid to long term.”
Tan also noted that countries in the region have made strides in improving their risk quality and resilience. In fact, China placed higher on the insurer’s index this year due to its infrastructure quality, while India also ranked up thanks to its improvements in the energy and fire risk sectors.
“As countries’ standards continue to improve, they will invite more capital, economic and corporate flows, and thus posit them to be more competitive, leading to advancements in their rankings on our Resilience Index,” he said.
“Resilience is a choice”
With all of these developments in mind, Tan set aside some advice for leaders and executives – whether they’re in insurance or not – regarding resilience in the face of regulatory changes.
“We believe that resilience is a choice, and we are here to help businesses thrive,” Tan said. “We encourage stakeholders to take proactive and preventive steps to secure their operations. We use robust science-based data and engineer solutions to help businesses protect today and prosper tomorrow. We believe leaders should adopt a forward-thinking mindset. By anticipating future challenges, such as the impacts of climate change, they can then plan and implement appropriate measures to future-proof their operations and ensure continuity.”
Likewise, investing and keeping abreast of innovative solutions, technologies, and other practices can help leaders make informed decisions about suitable strategies. In relation to climate risks, Tan said that assessing climate-related hazards in their operations and employing proper mitigation strategies should enable them to ensure business continuity even if the worst comes to pass.
“Backed by over 200 years of data, our research and engineering teams identify the risks business operations face and provide steps to minimise those losses, thereby providing maximum gain in value. Facts support good decisions,” he said.
The onus is not entirely on businesses and MNCs, however, as Tan said that insurers have a large role to play in keeping firms across the world resilient in the face of these huge developments and changes.
“Businesses that prioritise resilience are well-prepared for future challenges,” he said. “Insurers like FM Global play a crucial role in addressing risk quality and supply chain resilience challenges in the current global economic volatility. Understanding the business impact of risks and exposures allows for better contingency plans. Broadly speaking, there are two ways to strengthen resilience: stay out of harm’s way and mitigate one’s risks through investments in property protection and business continuity.
“By prioritising risk management and improvements, business leaders can protect the long-term value of their businesses and stakeholder interests, resulting in operation resiliency and future prosperity,” Tan said.
This article first appeared in Insurance Business Asia.