Lendlease: Risk the Heartbeat of the Business
In the Loop exclusively interviews Kevin Bates, Group Head of Risk and Insurance at property and construction company Lendlease; and President of RIMS Australasia, to gain an insight into how this leading business views the risk environment.
With a 44-strong cohort in the global risk insurance function within Lendlease, risk management is clearly top of mind. A high-performing part of its operations, the Australian risk team forms part of the global risk team, which is responsible for cascading the risk appetite set by the board and global leadership team throughout the company.
The risk function’s purpose is to provide effective risk management and promote a culture of risk awareness to drive performance. “That's our overall objective. Risk is owned by the business, and the risk function assists the business to identify, mitigate and report risk,” Bates explains.
Importantly, risk is aligned with overall business strategy. “We execute our strategy as an overlay to the overarching Lendlease strategy, Focus and Grow,” which emphasises excellence in delivery and large-scale urban regeneration among other elements, he adds.
At the moment, Bates says there is a big focus on geopolitical risk in the business.
“There’s global uncertainty around the US elections, as well as the ramifications of the Brexit referendum in the UK and what that means over the next ten years. The Italian referendum currently taking place will be pivotal to its position in Europe. If it goes against what the government's plans and expectations are, this could prompt a national election, which may lead to further instability for the “European Project”, observes Bates.
“In Australia, we are also working out how to navigate the very slim majority position the Coalition has. All that political uncertainty affects can impact market confidence,” he suggests.
Another challenge, says Bates, is the massive requirement right around the world for new infrastructure of every type. “We are also facing high unemployment in many countries, as well as large-scale migration, much of it involuntary, and there is the potential for social instability, which are all risks we are constantly assessing,” he says.
Lendlease is working through these risks, as well as mitigation plans, to future proof the business. “We have no control over many of these risks, as well as other factors such as natural disasters, extreme weather events. It's concerning that in the last five years, we've experienced six ‘one-in-a-hundred year’ storms. So the risk landscape is always challenging,” he notes.
Additionally, says Bates, the business is constantly assessing the threat of infectious diseases such as the Zika virus, and the potential for this and other illnesses to impact business operations.
Mitigating external risks takes a different approach to the way internal risks are managed in any business, given they are outside the company’s control.
“Appropriate risk mitigation starts with risk awareness and identification, controlling the risks over which you do have some power. This involves an awareness of the regulatory system and economic drivers, within a capital constrained context,” says Bates.
Key to this is access to up-to-date research about potential changes in the global capital markets, the competitive landscape and any shift in urban planning, which is critical for a property player. The potential for cyber threats is overlaid across all of this.
“Proper risk management is about making sure you have a resilience framework that can help future proof the business. We take a risk prevention rather than response position whenever possible. But sometimes it’s impossible to prevent a risk, and we have to be ready to respond,” he says.
Bates’ advice to other risk managers trying to navigate an increasingly complex world is to take a collaborative approach.
“We strive to be authentic leaders. Everything comes down to the risk culture that permeates the business. It’s important the risk team is a key influencer throughout the business, making sure the culture is correct right from the very top. We are focused on making sure the risk management mandate has clear and obviously links to the business’s strategy and core values,” says Bates.
“To be a great risk manager you must be aligned to the heartbeat of your business. You must be an enabler rather than a handbrake on happiness. Taking this approach means that when we want to do something strategically, we have already de-risked our operations as best as we can, to avoid being a responsive function whenever possible,” he adds.