Mapping out new trends — business and risk

The Covid-19 crisis is having a huge impact on Portuguese companies, particularly small ones in the events, tourism and hospitality sectors with many expected to close their doors by next year for good.

Yet for other sectors, particularly those in technology, innovation, artificial intelligence, energy and digitalisation, the pandemic is at the very least acting as a wake-up call to change their business structures and risk management models to become more adaptable, resilient and adept at managing risk, and in many cases has even acted as a catalyst to propel the more robust companies forward to accelerate changes that were already in the pipeline.
Many of these issues were debated on Thursday at a video-conference event organised by the American Chamber of Commerce in Portugal (AmCham) in conjunction with AON Portugal, a country branch of the multinational British company based in London which is a leader in risk management, insurance and reinsurance services, among others.
The debate also drew on the experiences of Galp Energia, a Portuguese Lisbon-based corporation which consists of over 100 companies engaged in activities such as natural gas supply, re-gasification, transport, storage, and distribution, petroleum products exploration, refining and trading among others.
Pedro Penalva, CEO of Aon Portugal pointed to the fact that all companies today are subject to greater public and regulatory scrutiny which “we feel increasingly more” and includes such issues such as sustainability in all its aspects, not just environmental, gender pay gaps and corporate governance, risk management, compliance, internal and external auditing and investment.
On the energy sustainability aspect, the President of AmCham, António Martins da Costa, who is a board member at the Portuguese multinational energy giant EDP (Energias de Portugal) which leads the way globally in green energy such as wind farms and solar parks, said that it, like other companies, were changing their paradigms in accordance with the COP 21 Paris Accord which reached a landmark agreement to combat climate change by 2050 and accelerate and intensify the actions and investments for a sustainable low carbon future.
Martins da Costa said this was changing everything, from production to transport, with the electrification of more consumption and a drive to energy efficiency using less natural resources.
He mentioned that clean and circular economies and recycling are “top of the agenda” in Europe, but cautioned that it would be difficult for some countries like “coal producing Poland to change from one moment to the next”.
The AmCham president said there needed to be a fair adjustment to change with compensation for the populations affected. “There are big risks from climate change to countries, economies and companies and climate change is in the Top 5 of risks for both company risk managers and politicians,” he said.
Martins da Costa explained that under a Green Deal the EU had earmarked €500Bn to help companies and societies to move towards green economies, while even capital investors in companies, BlackRock being just one example, are avoiding investing in “bad practice companies in terms of sustainability”.

Oil and gas industries

Both Martins da Costa and Sofia Tenreiro, COO (Comercial Business) of Galp agreed that large petrol and gas companies are also transiting gradually to cleaner and more sustainable energy production and sources.
Large international companies are forging ahead with renewables and Galp, as part of its low-carbon strategy, is developing its energy generating activities by using differentiated renewable sources that are competitive, especially in a low carbon context.
For example, in recent years, Galp has developed solar energy generation projects in Portugal and Spain and currently the company is developing these projects to guarantee a convenient Commercial Operation Data (COD), as well as analysing new projects that will enable Galp to develop its strategy of incorporating the production of energy from renewable sources.
Agreeing that corporate governance has developed considerably in the realms of clean energy and risk management issues, there have also been leaps forward internally in terms of recruiting, fostering team spirits and remote working.

Paradigm shift between organisations and clients

Sofia Tenreiro said that the Covid-19 crisis had caused a change in paradigm between clients and organisations with a de-bureaucratisation of organisations and impacts on their choices. “Companies are rethinking their missions and their impact on the world and on their clients,” she said.
“Companies have a fundamental and proactive role in responding to the impacts of this crisis both in confinement and post confinement and that role will become stronger. Sacrifices will have to be made to maintain some investments, some companies will have to reinvent their business models to meet clients’ needs, while digital transformation will make it increasingly important to protect clients in terms of data security,” Tenreiro added.
Tenreiro stressed that throughout the crisis, Galp took the decision not to close any shops or filling stations in order to support the community, particularly in rural areas while also delivering products such as refillable gas bottles to their homes. “We have to think not just about the economic issues but also about the social impacts on people’s lives,” she said.

An “optimist by nature”

Sofia Tenreiro said she was an “optimist by nature” and pointed out that the “crisis touches us on many levels” and that those companies that got involved in effective risk management in a proactive way, rather than a reactive one, would come out in a stronger position, particularly if they could examine how to meet their clients needs and concerns in a different way and rethink their missions.
Pedro Penalva of Aon said he was also “optimistic” and sad that risk always provided opportunities, but that the crisis had exposed fragilities and a lack of maturity in some company organisations.
“Those companies that are competitive and flexible will be better placed to adequately mitigate events and risk, and will have an advantage over those who don’t,” he stressed, adding that the future could bring other pandemics and situations of risk to companies’ intangible assets such as image and brand which were vitally important for many big Fortune 500 companies where the brand was worth up to 85% of their assets.
Penalva highlighted other current and future risks including cyber attacks on a global scale and climate change which were no longer risks on the horizon but were real now and affecting companies.
“We need to look at where there are opportunities to reduce the impacts of these risks as insurance premiums go up,” he said adding that Artificial Intelligence would have an important role to play for measuring these risks for capital.
“In future we will have to look at both main risks and diversified risks which are more volatile and complex both in their origins and how they manifest,” he explained, adding that Covid-19 had forced many companies to examine their long-term risk management strategies and Sofia Tenreiro agreed that technology would have a “very relevant and important” role in predicting and managing such risks.