Talking to people is the way to deal with global differences, believes David Gamble.

Risk is universal. Yet risk managers operate in a world of paradox.

Risk-strewn war zones and captive safe-havens; cash-rich societies and poverty-riven nations; calm commercial centres under terrorist threat; growing litigation in court, drug-driven crime on the streets; politically correct-employee rights and reducing corporate headcounts . . . a world of paradox.

It is a world growing smaller due to improved travel facilities and communication technology. It is a world getting larger through information overload and international opportunities.

It is a world where change is faster than ever before, yet some would argue that the more the world changes, the more it becomes the same. But if that is the case, why are risk managers increasingly looking for innovative and alternative ways of assessing, evaluating, controlling and financing risk?

Could it be the world is not a paradox, merely a compendium of evolving challenges for risk managers to tackle world-wide?

A common theme worldwide?

So, do risk managers operate differently in different countries? Should they so do? Or is there a key, a common theme to how risk managers internationally can handle the complex challenges of an increasingly global village?

AIRMIC chairman David Ketley works for Cargill Insurance, the US multi-national dealing with commodity tracking and processing throughout the world. He says: "A risk manager must be flexible and understand that different cultures look at things in very different ways. The only way to understand the local culture is to get out there and talk to people. Find out how your risk management philosophy can best fit with their culture.

"It is no use simply trying to apply global standards everywhere. What are you achieving by supplying safety boots and a hard hat to migratory workers who will sell the boots for three weeks' wages on the first day and then disappear."

Trying to ascertain proof of contractor's insurances can be also virtually impossible, says Mr Ketley. "You will often be given the answer that nobody carries such insurance here - why should we? But if you want us to take out a policy, we will do so and add it to the contract price."

Mr Ketley adds that not all the world is as litigious as North America or Europe. In other parts of the world, incidents which here would lead to a long, drawn-out claim for compensation get sorted out amicably by individuals, without insurance ever being mentioned.

Once known, such cultural differences can, of course, be calculated into the overall risk strategy of a multi-national. Therefore, surely, there are areas of risk where a global approach can be taken?

Universal risks

What about fire - arguably mankind's first and oldest risk, yet still not fully tamed? It burns just as well in Africa or Asia as it does in the United States or Europe, but not all companies get their fingers burnt when the fire-alarms go off.

Mr Ketley again: "It is every company's aim to have corporate fire protection standards throughout every plant - irrespective as to where it is located. But problems can arise with acquisitions - especially in emerging countries where the cost of installing protection may equal three year's earnings, and the price of Factory Mutual or Underwriters' Laboratory-approved equipment may double with the imposition of import duty."

Hence, the evaluation of risks differs in different countries. One has only to look at the various attitudes and states of preparedness throughout the world to mankind's newest world-wide concern - the year 2000 computer "time-bomb" - to realise that.

Perhaps that is the first lesson for risk managers to learn: accept that different solutions may be required for different cultures. Risk managers should agree to differ.

Comparing Europe and the US

The Tillinghast-Towers Perrin 1997 survey comparing risk management operations in eight European countries with the US confirms that there are national and regional cultural differences.

European risk managers focus on insurance buying and property and liability risk control, the survey reports. Their US counterparts focus on risk-financing structures and cost-control activities, with an emphasis on workers' compensation and liability insurance matters.

More than 80% of the respondents to the Tillinghast survey purchased multi-national insurance programmes for property and liability cover. The cost of property premiums varies between Europe and the US, and between European countries (rather than industries), with liability premiums in Europe being highest in Germany and Holland. Three-quarters of respondents own a captive insurance company with the UK and Belgian multinationals keenest on this self-insurance method.

Such differing trends in risk management practices do not surprise me. When I worked in Japan there was a high awareness of natural factors such as earthquakes and climatic risks. In other areas of the world other matters are more important. I think you have to accept that risk management principles may be influenced by such things as historical, social or political factors in different parts of the world.

A broadening approach

Even so, that does not mean that risk managers should not continue to strive for improved risk solutions. In many ways, I believe that risk managers can act as a catalyst for beneficial change.

Today's risk managers are increasingly taking the holistic view of risk, considering aspects which may affect an organisation's performance and bottom line, seeking fresh solutions such as self-insurance or risk retention, rather than traditional risk transfer.

This broadening of the risk management outlook has produced a more professional approach to the role and helped risk managers, particularly in the UK, to become better advisers to the decision making of their boards.

Paul Taylor, the chairman of the AIRMIC special interest group for international matters, believes this development process needs to continue to enable risk managers to cope with increasing global risk complexity and the pace of change.

He says: "Risk managers need to develop the skills to direct and manage risk management strategy across their corporate group. This necessitates clear communication, management of change, selling and negotiating skills, identifying added value for individual parts of the group, as well as the whole, and increasing reliance on other people doing the work. This is in addition to the professional knowledge and skills required for the role."

Mr Taylor, who is director of risk management for the transport group NFC plc, accepts that the concept of risk management is viewed differently throughout the world. "It is well developed in North America, reasonably well developed in the UK and parts of Europe, but the culture of 'risk management equals insurance buying' is still very current in many companies and countries. Globalisation of business is helping to spread the message that there is more to the role than that.

"In the more insurance-orientated cultures, the risk management approach is to buy the largest amount of insurance cover at the cheapest possible price. Areas like directors' and officers' insurance, credit, corporate image, due diligence, and risks related to mergers and acquisitions are generally not often considered as critical."

For many, the philosophy of risk management is to protect, guard and insure; in other cultures it is to teach people to be aware of risks and how to handle them. Arguably, the risk manager's role is to balance risk control with risk financing and allow an organisation the opportunity to take on additional risks which will give it a beneficial competitive edge.

Through his work with the AIRMIC international interest group, Mr Taylor is particularly keen to progress ways of sharing information with risk managers in other countries, probably through joint meetings in Europe and, perhaps, further afield. Interestingly, he told me: "I believe that the internet is a useful tool for continuing communication, but I do not believe it is a tool to replace initial face to face meetings and discussions."

Important issues

An internal questionnaire by the UK association AIRMIC of risk managers of global companies asked what were the most important issues they wanted to discuss. Key aspects were:

* Global programmes, including European freedom of services.

* Differences in culture, methods of operation, risk financing between the UK and other countries.

* Achieving statutory compliance and compulsory insurance across the globe.

* Recommended resources in other countries.

* Differing legal, business and cultural environments.

* D&O and employment practices exposures.

* Corporate governance and due diligence.

* Continuity planning.

* Benchmarking globally.

Chris Lajtha, corporate risk manager of Schlumberger Ltd, agrees that the risk manager's role has developed considerably in recent years. He also remarks on the increased activity within national and international risk management professional organisations, such as AIRMIC, and the European and international federations of risk management organisations, FERMA and IFRIMA, and so on.

He says: "There is more communication, more co-ordination between risk managers today. Networking, sharing experiences is vital. When you network with people from different business backgrounds or nations, you become like a cat with extra lives to enjoy."

Improvements in world-wide communication, e-mail and the internet have brought the greatest challenge and opportunity to risk managers, he believes. "There is a lot more information, coming faster now and risk managers need to avoid becoming overloaded."

They should, believes Mr Lajtha, concentrate on doing selected things well rather than trying to handle everything at once. "I think there is even a place for a new industry role - information intermediaries - where specialists sift incoming data to provide quality information for busy risk managers."

The bonus of world-wide communication is that it makes resourcing risk management services much easier and quicker. Although based in Paris, he says he feels he could operate from anywhere in the world. "It has never been easier to deal with the people you want to get to. If the local services range is not adequate, I simply call it in from elsewhere."

But knowing whom to call, where, and for what purpose comes down to a wide industry knowledge and the right contacts. Adds Mr Lajtha: "Today, more than ever, risk management is a people industry. It is so necessary to meet people," he added.

Or as AIRMIC chairman, Mr Ketley, says: "Get out there and talk to people".

David Gamble is executive director of AIRMIC. Tel: +44 (0) 171 480 7610. Fax: +44 (0) 171 3752. E-mail: