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Emerging markets, emerging risks.

The growing importance of the risk management function and recognition of the contributions that risk managers can make to the economic success of their companies prompted more than 300 attendees from 22 nations to gather in Buenos Aires for the second Latin America Risk Management Congress. At the four-day gathering, sponsored by the Asociacion Latinamericana de Administradores de Riesgos y Seguros (ALARYS), the regional umbrella risk management association, participants exchanged advice about the best ways to implement risk management practices. In a series of multilingual presentations, attendees also received international perspectives on loss control, risk allocation, environmental awareness and other techniques used by their colleagues in more developed regions.

"It was a very successful conference," said Jorge Luzzi, president of ALARYS and risk manager-Latin America for Pirelli Group. "The turnout we saw at the meeting indicates that risk management's role and prospects are growing in the region and that more Latin American companies are starting to follow guidelines already followed in other parts of the world. The importance of risk managers is expanding, and risk management activities are here to stay."

Fueled by increased international trade, economic growth and newly opened markets, risk management is expanding throughout Latin America. A growing number of companies from outside the region are investing in international joint ventures and infrastructure projects, and more Latin American companies are attempting to compete on a global basis. These developments create new exposures, as well as opportunities for risk managers to identify and mitigate potential losses.

One of the most significant changes prompting the growth of risk management in Latin America is the liberalization of once-restricted insurance markets, according to Alex Moczarski of Marsh & McLennan Chile. Now that companies are freed from requirements that they purchase policies from state-owned insurers, there is a new need for risk managers able to arrange effective programs. "Now companies are able to purchase custom-made products to serve their needs," said Mr. Moczarski. "The options have increased, but this requires risk managers to have better knowledge and analytical abilities, as well as a better understanding of their company's business."

To illustrate the contributions risk managers can make, several practitioners shared success stories with their colleagues. Javier Navas, corporate risk manager for Telefonica Espana, described the approach his company took when it invested in newly privatized phone companies in Argentina and Chile. "We combined centralized risk management guidelines with local services," Mr. Navas said. "We defined the functional responsibilities of local risk managers but gave them some flexibility to adapt their programs or take advantage of local relationships."

Nora Leal, risk manager for the Mexican cigarette producer Cigatam and president of Mexico's risk management association, listed the steps her company took to reduce losses caused by transportation robberies. "Cigarettes are almost a form of currency in Mexico, and stolen cigarettes are very easy to distribute," Ms. Leal said. To reduce losses, Cigatam established a database that identified the most common times and places of robberies. The company then changed delivery routes and improved security at distribution centers. In addition, Cigatam switched to smaller trucks to reduce the value of individual shipments. "By analyzing our risks carefully and instituting a coordinated process to reduce these risks, we reduced our claims and premiums significantly," Ms. Leal said.

Jose Figueroa, general manager of Factory Mutual Italia, told attendees that effective risk control must be an ongoing process that requires every employee to be aware of potential losses. For instance, seemingly small changes to product packaging can dramatically increase the hazard in a fully stocked warehouse, or placing a plant in front of a fire alarm box can increase the potential danger in an office. "Your company's culture has to get everybody involved in identifying potential risks. People have to realize the need to examine the possible effects of changes and understand that common sense is the best form of risk control," he said.

A growing number of Latin American companies are also starting to address the products liability exposures created by the export of consumer goods. Christian Felderer of Zurich International Group in Switzerland said that many companies eager to reach the marketplace fail to consider the potential consequences until the first loss is reported. "You have to know where your products are going to go and what risks they will face on arrival," Mr. Felderer said. "It's important to ask questions about the different standards your product will be judged against and whether the product meets those standards."

Mr. Luzzi said that additional conferences are planned to continue the development of risk management throughout Latin America. Risk managers from several South American nations will gather for a conference in Brazil this summer, and a meeting including attendees from Central and North America will be held in Venezuela in 1998.
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Title Annotation:1996 Latin America Risk Management Congress conference
Author:Pelland, Dave
Publication:Risk Management
Date:Feb 1, 1997
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