Pure risks¹ are managed by Risk Management S.p.A., a Group company that covers every phase of the management of pure risks, from
identification to quantification, analysis and treatment. At Chrysler Group, this function is assured by the Risk & Insurance Management organization that is responsible for asset and balance sheet protection and involved in loss prevention and continuity of operations. On the basis of Risk Management analysis, strategies and actions for the prevention, elimination, mitigation or transfer of those risks are designed and implemented in collaboration with sector risk managers. All activities designed by Risk Management to manage pure risks, and implemented in 2011, are detailed in a public document whose objective is to communicate to stakeholders the Fiat approach and methods. Results achieved show that prevention is the foundation of risk management. The risk management process, methods and tools are designed to minimize the likelihood of occurrence and the potential impact of risks.
Field audits are performed with the support of an external risk consulting agency that is a member of a leading insurance group. Subsequently, risk profiles are created in order to identify the appropriate measures for prevention or mitigation based on international standards and best practice. The audits of Fiat Group sites (excluding Chrysler Group) are based on a three-year cycle, together covering approximately 92%² of the insured value.³ In 2011, 57 sites were audited covering approximately 53% of activities within the scope of analysis. At Chrysler Group, audits are conducted at all main sites each year. In 2011, 41 locations were audited, representing 91% of insured value of all Chrysler Group sites. Prevention and mitigation measures put in place at Fiat Group sites (excluding Chrysler Group) in 2011 resulted in targeted investment of around €17.3 million that enabled a reduction of approximately €2.3 billion in the potential value of losses expected, with a global efficiency index in excess of 100/1. Further evidence of the efficiency of Fiat’s methodology is the percentage of sites that attained Highly Protected Risk (HPR) certification from the international insurance market. In terms of insured value, these sites account for approximately 67% of activities (not including Chrysler Group).
In 2011, the Risk Management Lab continued its research activities to develop innovative prevention methodologies to guarantee the ability to identify, analyze and manage pure risks. Many activities and initiatives were undertaken during the year.
VISIO@RISK software was extended to include hurricanes and hailstorms and was rolled out to all Group plants (excluding Chrysler Group), enabling real-time sharing of individual risk profiles.
In addition, a dedicated climate change brainstorming workshop was held with representatives of the main Group functions to identify, analyze and evaluate new potential risks and mitigation actions associated with climate change. As a consequence, dedicated guidelines related to climate change have been issued and distributed throughout the Group in order to raise awareness and promote implementation of the most appropriate actions.
Also, a new methodology was developed to identify sites that are potentially vulnerable to
earthquakes. Moreover, a new methodology was developed to identify, analyze and quantify insurable environmental risks with a pilot project conducted at three Italian sites. (1) Pure risks are risks resulting from natural causes or accidental or malicious acts (fire, explosion, floods, etc.) that may result not only in damage to goods or facilities but also lead to a short- or long-term interruption of operations.
(2) Scope of analysis. (3) Calculation based on replacement value of property insured and cost associated with interruption of activity. (4) Figures relate to the period from 1 September 2010 to 31 August 2011 (Insurance Year). (5) Efficiency index for mitigation measures (KPI = reduction of expected damage/cost of protection) indicated as best practice for industrial risk management.
The contribution in the fight against climate change
While the role played by risk prevention in safeguarding assets and ensuring uninterrupted production has always been acknowledged, only in recent years have its benefits to the environment been brought to light by authoritative international research.
Recent studies¹ in fact demonstrate that at industrial sites that have not been planned and managed according to modern and rigorous prevention and protection standards, the environmental benefits from energy saving initiatives can be drastically reduced or even eliminated following the occurrence of just a single technological (fire, explosion, etc.) or natural (flood, earthquake, etc.) event. Due to the higher risk factor at such sites, they experience an increase in carbon emissions estimated at 14%. In contrast, at sites that have prevention programs and protection systems aligned with international standards, such as the Highly Protected Risk certification, it is estimated that the likehood of occurrence of a risk event decreases, becoming practically insignificant. Furthermore, should such an event occur, the actions planned would considerably limit environmental consequences. For example, at sites where automatic sprinkler systems are used for fire protection, the CO 2 emissions given off from burnt materials are considerably lower. The quantity of these materials in fact decreases from a percentage varying in the 62-95% range when a fire is extinguished manually to 3% when the operation is performed by a sprinkler installation. (1) The influence of risk factor on sustainable development – Gritzo, Doerr, Bill, Ali, Nong, Krasner – 2009; Environmental impact of automatic fire sprinkler – Wieczorek, Ditch, Bill – 2010.