CNH Industrial strongly believes in risk management and loss prevention, aimed at avoiding property damage and any resulting interruptions to business operations.
CNH Industrial’s Pure Risk Management Policyis based on four fundamental pillars:
- implementing measures that prevent accidents or limit their effect
- adopting the highest international reference standards for the prevention of risks to property
- minimizing the cost of risks by optimizing prevention/protection investments, self-insurance, and risk transfer programs
- centralizing relationships with domestic and international insurance markets.
The pure risk management process is subdivided into five stages:
- identification of risks, areas, processes and key activities
- quantification of the probability of occurrence of incidents and subsequent potential economic impact, calculated on the basis of direct damage and interruption of Company activities
- risk analysis using mapping and benchmarking tools, to identify operational priorities based on cost/benefit ratios
- implementation of risk management measures designed to reduce the probability of incidents, control their effects, and minimize their economic impact
- constant monitoring of risk levels within existing operational units and for new projects.
The overall risk management process is carried out by a dedicated center of competence, supported by a consulting company specialized in industrial risks whose field audits ensure an in-depth, continuous, and objective assessment of risk levels across the entire Company.
In 2013, this process involved 49 plants (covering approximately 62% of CNH Industrial insured value) and 178 new projects, in line with international prevention standards.
During the year, the Company invested around €9.1 millionin prevention and mitigation measures, saving approximately €1.05 billion in potential losses, with a global efficiency index of 0.86 , in line with the highest international standards.
The synergy between the Company’s strategic approach to loss prevention and corporate Risk Management, which focuses on developing forward-looking engineering solutions to risk, has proven to be a key element of the Company’s overall sustainability approach, as demonstrated by specific projects that highlight the contribution of risk management in addressing climate change issues.
The Company is currently working on the following key projects:
New approach to insurable environmental risks; Risk Management teamed up with the Environment, Health & Safety (EH&S) Department to develop an innovative risk management methodology to:
- obtain objective and quantifiable information on insurable environmental exposures
- improve risk profiles according to the Company EH&S strategy
- understand and clearly communicate priorities and benefits
- effectively inform the insurance market about the loss prevention activities in place to prevent and mitigate potential environmental losses
- obtain environmental insurance coverage in line with corporate strategies, commensurate with risk exposures and current loss prevention activities.
The methodology is scientifically-based and avails itself of certified self-assessment tools; already used in 2012 to assess and analyze 46% of CNH Industrial total insured value, it led to the development of the Company’s first environmental maps quantifying the overall levels of risk.
The self-assessment data is verified and validated by specialized environmental risk engineers sent by each regional EH&S department at a selected number of representative sites. The field visit campaign started in the second half of 2013, and will continue in 2014.
The new methodology and its outcomes – the accurate identification, quantification and management of environmental risks – were very well received by the insurance market, and have significantly affected CNH Industrial’s risk category assignment.
Earthquake risk reengineering; in 2011, a workgroup consisting of Risk Management, a leading insurance company, and Naples University launched a three year research project to develop a scientific earthquake risk evaluation process. This quantitative analysis takes into account the combination of hazard, structure vulnerability, and exposure/exposed values, and is based on multiple data sources.
Seismic risk measurements:
- relative, mainly for prioritization purposes - Level 1
- absolute, based on fragility curve analyses from literature - Level 2a
- absolute, based on analysis of fragility curve computations - Level 2b
Climate change potential impacts analysis; this project was launched to evaluate potential new risks posed by climate change, with three goals in mind:
- raise awareness within the entire organization about the new potential risks posed by climate change
- explain the nature of the risks associated with climate change
- verify that all existing and new risk management processes take climate change into consideration
This analysis will allow to:
- identify “relevant” data about plants’ rain disposal networks
- create an ad hoc form to compile and report key data
- develop a methodology to identify and extract current design data based on specific occupancy and latitude
- develop specific gap analysis software (to compare construction design data with current design data)
- identify intervention priorities based on both the gap and values at risk.