A 360-degree approach to risk management

In difficult economic circumstances, risk managers are often faced with justifying the value of what they do to the wider company. Gategroup group risk and insurance manager Daniel Halter seems clear on his answer to this conundrum: knowledge is power.

He says: “It is important that information is shared within a company. What we do is ensure that everyone, whether they work in marketing or finance, knows the big picture. They all see, not only the risks, but the opportunities those risks bring as well.

“The value we provide is not only the opportunity for the company to think about and plan for the threats it faces, but also they way in which those threats might hide opportunities that weren’t seen until we began our analysis.

“We provide the tools to work through what the business does and enlarge the picture for everyone. In business, all knowledge is always better than not knowing.” Gategroup is the Zurich-based parent company for 11 brands providing a range of services to the travel industry – particularly air travel – including catering, hospitality, provisions and logistics. It has more than 27,000 employees working across 170 facilities in 35 countries. Revenue for 2011 was CHF2.7bn (€2.2bn).

Innovation in risk management

Two years ago, the firm began to implement an innovative new enterprise-wide risk management plan, at the heart of which was an integrated approach to risk management focused on providing real value across the company.

Halter says: “We have always done the bottom-up approach. This has been mainly about compliance. What we are doing now is bring that together with the top-down approach to more strategic risks.”

Halter and Gategroup worked with risk consultants Aon to identify the top risks to the firm. “These are not so different to many other international firms, although there are some sector-specific risks,” he says. “For example, we are a business-to-business operator, and although there are some 270 airlines worldwide,
only about 20 are responsible for 90% of our sales. If something happens to one, that could be a problem for us. Perhaps, they don’t pay their bills or they change some system. We try to mitigate this by working closely with them, but they are all exposed to wider crises: credit problems, economic slowdown. We have to prepare.

Plus there are the ‘traditional’ risks, such as food safety, which is extremely important, along with fire risk. The latter means looking beyond our immediate facilities to understand the impact.”

Operating globally in 35 countries, with different demands, regulations, laws and expectations further complicates the picture. Airports are heavily regulated environments subject to intense policing and site control – when things go wrong, they can go wrong fast and the footprint of the impact can be large. “At Heathrow, a building burned down and the authorities closed the entire sector down,” says Halter. “We were not able to operate for two days.”

Disruption like this had the potential to have a huge impact on Gategroup’s customers – some may not even have been able to fly without access to its services. Instead, though, the company not only kept running, but it demonstrated to its customers Gategroup’s competence and ability to manage a crisis, as well as the value of risk management. “We handled it,” says Halter. “Luckily, we had a good back-up plan. But the lesson for everyone is that a backup plan is not enough, in a way you always need a new back-up plan. It has to be a dynamic document that adapts to change and stays relevant throughout it all.”

Taking risk seriously

Successes such as this tend to act as catalysts for renewed vigour and adverts for the importance of everyone in an organisation taking risk seriously. Halter believes that widespread faith in risk management has helped the successful implementation of the Gategroup strategy. Halter says: “We have been good at finding out risks across the business and challenging the way that they are being approached. Sometimes, existing mitigation has been good, sometimes not so good. But this has been the value of taking a new look at all our operations.

“Now both the finding out of risks and their treatment have been combined into one operation. We now have a cross-function steering committee in place looking at risk, with different experts from human resources, finance, all aspects of the business, with everyone bringing their expertise to the issue. It’s more of the 360-degree approach and everyone values that level of scrutiny.

“We are not only enlarging and developing the awareness of risk, we are enlarging and developing the awareness of the business, from top to bottom.”

And that is something everyone can value.