Sonepar CEO Philippe Delpech and VP Risks and Insurance François Beaume were recently interviewed by the French Association AMRAE* about how the COVID-19 crisis has affected the company’s approach to Risk Management and which actions have been taken to improve our current processes on a global scale.
Read the full interview below:
How has your approach to risk management changed considering the pandemic?
Philippe Delpech: Sonepar is present in 44 countries: this pandemic has affected our associates, customers, and activities in virtually all our regions and continues to be a daily concern. This event teaches us that anything can happen, including the unthinkable. We were struck by the complexity of understanding and managing the multitude of government decisions, regardless of the country, and their impact on our activities. This has had a lasting effect on our risk management approach, and we are working to integrate this feedback into our processes. This health crisis reminds us, in a very concrete way, that risk management is everyone's business and often begins with simple actions, within everyone's reach, with first and foremost respect of barrier gestures. Combined with more global measures taken by the public authorities and the upcoming vaccination campaign, these actions will - we all hope - make it possible to reduce the risk to an acceptable level allowing us to return to a certain normality. The example of Covid-19 is a good illustration of the necessary risk understanding prerequisite to protect oneself effectively against it.
How have your Risk Management expectations changed?
Philippe Delpech: The specific context of the Sonepar Group, mixing strong growth, digital and organizational transformation, sustainable development challenges, combined with exogenous factors such as the gradual rise of certain threats (geopolitical and social tensions, global warming, cyber and health risks, etc.), or the tense context of the insurance market, argue for greater collective risk management efficiency to strengthen our resilience. Well before the pandemic, we had already taken steps to strengthen our risk management efforts and will continue to do so in the coming years, with the aim of more systematically integrating a risk management reflex into our day-to-day actions and strategic thinking.
What have been the benefits of risk mapping? Did you adapt it after March?
Philippe Delpech: Our continuous risk analysis helped us to get through this crisis. Our risk management teams are currently rethinking our risk mapping methodology and cycles to make this tool more useful and operational in the face of current and future challenges. The development of future strategies will not only be based on past analyses. This requires us to reinvent the risk mapping exercise.
Have you defined and communicated internally on your risk appetite? Has it changed since the crisis?
Philippe Delpech: For a family group like ours, risk appetite is rooted in the long term. Embedded in the Group's DNA and shared by all, it is gradually evolving, not so much in reaction to this crisis, but to support major societal movements, environmental challenges, and their translation into our business model. It proves that the fundamentals of our business model and risk appetite are relevant. They both help to secure the resilience and performance expected by our shareholders and drive the spirit of Sonepar: "Powered by Difference".
How has the pandemic changed your approach to risk management?
François Beaume: This crisis, unprecedented in modern history, both in terms of scale and duration, shows the need, but also the complexity, to have reliable information to enable rapid decision-making. We set up specific weekly monitoring for this purpose at the start of the pandemic, which is still in place. This has been supplemented by practical guides for countries to enable them to quickly identify and structure the measures to be implemented. This operational support was particularly welcomed by countries and operational entities. The pandemic has also confirmed the importance of anticipation, through upstream risk identification and prevention coupled with a robust crisis management process and business continuity measures. As certain risks become systemic, risk management is more than ever an essential asset for Sonepar in order to navigate in this complex and evolving context. Risk Management contributes to preserving the Group's performance and resilience by effectively combining various methods and tools, including insurance.
How have senior management's expectations of Risk Management changed?
François Beaume: Prior to the pandemic, the Group's senior management had strengthened the position of the function by integrating risk management, including insurance, within the Corporate General Counsel's Office. This makes it possible to develop a cross-disciplinary approach to risks, combining risk management, insurance, governance, legal and compliance into the same dynamic. It also facilitates co-construction of initiatives with other departments (digital, strategy, HR, etc.) and the promotion of collective work.
Since this integration, our actions have tended to make the organization more secure, provide tools and methods to the various actors and formalize a minimum of practices in order to achieve a common base, which, in a historically decentralized group like Sonepar represents a fundamental change. The Group's strong growth makes this formalization and systematization stage necessary to enable a broader deployment and understanding of risk management principles and, ultimately, to strengthen our performance. This involves notably the safety of associates and customers, which, more than ever under current health conditions, remains our priority.
What changes have been made to risk mapping?
François Beaume: None at this stage, but we are working to make this exercise both more responsive and more firmly anchored in our daily operations. 2020 actions were focused on updating our corruption risk mapping in-depth. In 2021 we will initiate an update of the global risk mapping, which should incorporate both methodological changes and new risks.
Do you use new indicators? more operational? more frequent?
François Beaume: Risk management indicators are bound to evolve, as they are closely linked to the risks that bear them. Each risk mapping update, whether global or specific (corruption, CSR, etc.), brings new risks, scenarios, and associated indicators, which must be monitored regularly. In addition to the risk mapping exercises, other risk indicators are measured regularly. For example, we have implemented since the beginning of the pandemic, daily and then weekly monitoring of the crisis, its impacts, and related action plans. We are also monitoring indicators focused on compliance, cyber risks, claims, etc., which remain relevant.
Have you noticed a change in your company's risk appetite? An injunction to find new opportunities?
François Beaume: Being a family-owned group structures our risk appetite over a longer time horizon, with a perspective of sustainability and transmission. However, this is not antinomic to growth and performance, quite the contrary, and encourages calculated and reasoned risk-taking in line with the times.
* Association pour le Management des Risques et des Assurances de l'Entreprise