atelier / workshop b1 a focus on vietnam - amrae of vietnam ... legal & business environment ......
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2
Intervenants
Modérateur
Jens Wolhlthat Board Member & International Director
Danh Duong Thanh Board of Directors Member & Head of Audit & RM Committee
Franck Baron
Atelier B1 – A focus on VIETNAM
Philippe Robineau Board Member & Managing Director
Ly Xuan Thu Head of Risk & Compliance
Board Member
Chairman Group General Manager Risk Management & Insurance
3
Content 1. Introduction to Vietnam: economics, legal and business environment 2. The Insurance Market in Vietnam 3. The risk culture in Vietnam: A broker’s perspective 4. The risk culture in Vietnam: A risk manager’s perspective Q&A
Atelier B1 – A focus on VIETNAM
4
Introduction
2nd largest
european
investor
(3.1 Billion
in 2012) 3rd
Economic
Partner
Members
of the OIF 110.000 Vietnamese speaks French
• 17th century - a jesuit mission (Alexandre de Rhodes)
• 18th century - economic and military involvement (etablishment of the Nguyen dynasty)
• 19th century - strong military involvement to protect catholic missions.
• 1887 creation of the french colony « Indochine Francaise ».
• Until the French defeat in the « guerre d'Indochine » and the independance of Vietnam proclaimed in 1954.
5
Introduction
Well located in Asia,
Fairly rapid
expansion,
Increasingly
attractive to business
investment
The ASAEAN (Association of Southeast Asian Nations) / ASEAN Economic Community: infrastructure development, tariff elimination and improved capital and labor mobility.
6
Introduction to Vietnam:
Economics, legal & business environment
CONTENT: I. Vietnam at a glance under economical and legal
aspects II. Economics - Facts & Figures - Vietnams socio-economic plan for 2014 III. Challenges for Vietnam under economical and
legal aspects in 2014
7
I. Vietnam at a glance under
economical and legal aspects
Vietnam is a socialist-oriented market economy, even though a vibrant, resilient and
dynamic market.
Population: Approx. 90 Mio. inhabitants - Quite young population!
Vietnam had a strong Gross Domestic Product (GDP) growth over the past years.
Vietnam has been in the past years since 2009 one of the 15 most attractive economies in
the world for Foreign Direct Investment (FDI)
Vietnam is rich in natural resources ( e.g. bauxite, nickel, copper, gold, tungsten, coal, oil &
gas).
Sectors in focus are primarily : Energy, Infrastructure, Retail, Real Estate.
Vietnam is an export-led growth economy. Exports made up almost 89% of its GDP in 2011
(Major goods for exportation are e.g. coal, textile & sewing products, footwear, fishery
products, electronic goods & parts, rice, rubber, coffee).
8
Vietnam is a WTO ( World Trade Organization) member.
According to a WTO analysis of the liberalization of market access in Asian
countries: Typical restrictions of market access such as limited number of
opened sectors are LOW in Vietnam and Singapore/ MEDIUM in Malaysia,
Indonesia, Thailand, Philippines, China / HIGH in India and Myanmar.
In principle, Vietnam‘s legal framework is considered investor – friendly and one
of the most liberal one‘s in Asia.
Current situation in Vietnam has the potential to ease M & A aspirations:
- Vietnamese Government is committed to equitization (privatization) of
thousands of State – Owned Enterprises (SOEs).
- Current economic difficulties in Vietnam led to financial exhaustion of local
companies. Foreign capital (FDI) to weather the storm is badly needed.
I. Vietnam at a glance under
economical and legal aspects
9
II. Economics
Facts & Figures
• Development of Vietnam‘s Gross Domestic Product (GDP) in past years:
2007: 8,5%
2008: 6,3%
2009: 5,3%
2010: 6,8%
2011: 5,8%
2012: 5,03% (13 year low!)
2013: 5,42%
• Consumer Price Index (CPI/ Inflation) in 2013: 6,04%
Note: The inflation has been brought under control! The 2013 CPI is the lowest
rate in a decade after having had a CPI of more than 18% in 2011!
10
II. Economics
Facts & Figures
• In 2013, Foreign Direct Investments (FDI) of almost USD 22 billion were attracted (consisting of approx. 1.200 new projects from 54 countries and permitted 450 ongoing projects)
Note: This has been an increase of almost 55% in comparison to 2012! Target as set for FDI 2013 has been: USD 13 - 14 billion.
Foreign key investors are: (1) Japan (2) South Korea, with Samsung as biggest foreign investor (3) Taiwan and (4) China
• Average annual salary per Vietnamese worker in 2013: ca. USD 1.960 per worker
2012: Annual salary per worker has been 27% less per capita
1992: Annual salary per worker has been USD 140.- (= 14 times less as in 2013)
• Current insurance penetration/ insurance density in Vietnam: approx. 1,6%
• Conclusion: In light of the young population of Vietnam, there is a huge potential in particular for retail insurance & life insurance products in the upcoming years!
11
II. Economics
Vietnams socio-economic plan
2014
The Vietnamese National Assembly approved the following targets for 2014 to
create more macro-economic stability and to curb inflation:
Gross Domestic Product (GDP): 5,8%
Consumer Price Index (CPI) Increase: 7%
Increase of export turnover: 30%
Excess of imports over exports: 6%
Total investment for social development: approx. 30% of GDP
Poverty reduction: 1,7% to 2%
Goal is to create 1,6 Mio. new jobs
12
III. Challenges for Vietnam under
economical and legal aspects in 2014
4 of the biggest challenges for Vietnam in 2014 are:
• A) Restructuration & consolidation of the poorly performing bank sector
• B) To pursue restructuration of State-Owned Enterprises (SOEs)
• C) Legal reforms to better attract and manage Foreign Direct Investments and
to support domestic Small Medium Enterprises (SMEs)
• D) Successful conclusion of the Trans- Pacific Partnership (TPP)
Restructuration & consolidation of poorly performing bank sector:
• Government completed equitization of 4 state owned commercial banks.
• A state owned company (Vietnam Asset Management Company) was established to
purchase bad debt from banks to clear their books and took over in 2013 already
USD 1,6 billion of bad debts.
• Foreign investors shall be allowed to hold larger stakes in domestic financial institutions in
2014 up to 20% (current limitation: 15%).
13
III. Challenges for Vietnam under
economical and legal aspects in 2014
To pursue restructuration of SOEs:
• Currently, Vietnam has 1.400 SOEs.
• Debts owed by the state sector (i.e. by the SOEs) in 2012: USD 64 billion = almost 50% of Vietnams GDP.
• Goal, as stated during a conference in Hanoi in Dec. 2013 from Mr. Hoang Trung Hai (Deputy Prime Minister): 600 SOEs in 2015. 300 SOEs in 2020.
• The Deptuy Prime Minister did also announce further activities to ban corruption and punish officials being corrupted.
• Electricity, Energy and Mines Sector shall however remain with dominant shareholding by the Vietnamese Government.
Legal reforms to better attract and manage Foreign Direct Investments (FDI)
and to support domestic SMEs:
• Vietnam is working on amendments of the Investment Law and Enterprise Law to better attract and manage Foreign Direct Investments.
14
III. Challenges for Vietnam under
economical and legal aspects in 2014
• A new Employment Law (first of its kind to rule employment related matters) shall be enforced as per January 1, 2015.
• Deputy Prime Minister emphasized that progress has to be made concerning fair competition for all companies (not only providing privileges for SOEs).
• Domestic SMEs shall receive better access to capital.
Successful conclusion of the Trans-Pacific Partnership (TPP):
• A huge step forward for an export driven country like Vietnam would be the conclusion of a trade agreement such as the TPP pact in 2014.
• The TPP is currently consisting of the following 12 members: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, USA and Vietnam.
• If successfully concluded, the TPP pacts stands for roughly 40% of the world‘s GDP and 1/3 of the world‘s trade volume.
15
6th February 2014
PVI Insurance No.1 Industrial Insurer in
Vietnam
2. The Insurance Market in Vietnam
16
Vietnam insurance market at a glance Challenges to the insurance market
16
Economic recession, pressure on capital a number of Vietnamese corporations in
general and particularly in financial sector have to take restructuring action seek for
strategic partners to access to capital leverage M&A activity.;
M&A continues to be a increasing trend in Vietnam in the upcoming years, and
Insurance industry is not an exception
The entry of the foreign insurers into the domestic market create more difficulties to the
local insurers;
The increase in market capacity has led to fierce competition for business and rate
reductions in many classes;
Economic and regulatory challenges;
Effects of climate changes and potential catastrophic losses in Vietnam.
17
Vietnam insurance market at a glance Regulatory and legal environment
17
Insurers operating in Vietnam face a range of economic and regulatory challenges. However, the recent and anticipated regulatory changes will lead to
stronger insurers and more structured governance of the insurance sector.
December 18, 1993: Decree No.100/CP authorized the
formation of insurance enterprises other than state- owned
enterprises
December 9, 2000: the Law on Insurance Business
developed a comprehensive approach generally
applicable to the insurance business
November 24, 2010: Law 61/2010/QH12
amended and supplemented some parts of the
Law on Insurance Business December 2011: the issuance of Decree
No. 123 confirmed that foreign
enterprises may open non- life branches
in Vietnam
1993: Insurance was began to be recognized as
business activity, and subjected for business
regulations
1 January 2008 abolished the limitation of 100% foreign
invested insurance enterprises from providing statutory
insurance services
18
According to Resolution No.26/NQ-CP dated 09/07/2012, up to 2015, State-owned-enterprises and Corporations
have to complete the divestments on their non-core business sector. Divestments goes with restructuring process,
particularly in real estate, banking, finance and insurance industry.
Decisions No.1826/QD-TTg dated 06/12/2012 of PM has approved the “Restructure security market and insurance
enterprises” Project to enhance financial competency, corporate governance, risk management and services quality.
Capital requirement: change from Solvency Margin to Risk-based Capital concerning the risk ratio in every strategic
decisions to provide better management of capital.
Vietnam insurance market at a glance
Regulatory and legal environment
19
Vietnam insurance market at a glance Compulsory insurance
19
Motor Third party liability
Aviation third party passenger liability
Professional indemnity for lawyers, architects, engineers, securities companies (stockbrokers), notaries,
auditors, fund management companies, insurance brokers and contractors supervising the execution of
building works.
Fire and explosion insurance on 16 different types of high-risk industries.
Employers’ liability insurance in respect of construction works.
Insurance for contractors performing surveys for construction work and performing supervision of the
construction.
A guarantee covering construction tenders presented
Environment impairment insurance for vessels carrying oil and gas and dangerous goods in Vietnamese
waters
20
Vietnam insurance market at a glance Non- admittance to foreign insurers
20
Since January 2007 when Vietnam officially became a member of WTO, foreign insurers
have been allowed to provide insurance into Vietnam, with limit to the following conditions
according to the Decree 123/2011/ND-CP of the Vietnamese Government :
Total assets equivalent to a minimum 2 billion USD;
Minimum credit rating of BBB+ (by S&P/ Fitch) or B++ (by AM Best) or Baa1 (by
Moody’s);
Have been profitable in the consecutive three financial years.
According to Article 6 of the Law on Insurance Business providing the basic
principles of insurance business states that “Organizations or individuals having the
demands for insurance may only buy insurance from insurance enterprise authorized
to operate in Vietnam”.
21
Vietnam insurance market at a glance Admittance to foreign insurers
21
ADMITTED
Conditions for granting license for
establishment and operation of
foreign insurers in Vietnam:
Enterprise has been legally operating for
at least 10 years pursuant to regulations
of the country where it has its head office;
Total assets equivalent to a minimum 2
billion USD in the prior year;
Has not committed a breach of the law on
insurance and other related laws;
Required legal capital of 300 billion VND
for non- life insurance business and of
600 billion VND for life insurance
business.
NON- ADMITTED
Enterprises with foreign- invested capital;
Foreigners working in Vietnam;
Reinsurance services;
Insurance services in international transport and
commercial aviation;
Insurance broking and reinsurance broking
services;
Consultancy, actuary, risk assessment and claim
settlement.
Non- admitted business may only be
placed through brokers licensed to
operate in Vietnam.
22
Vietnam Non-life Insurance market Estimated as at 31st December 2013
1
• 29 Insurance companies, 2 Reinsurance companies and 11 brokers
2
• Bao Viet, PVI Insurance, Bao Minh, PJICO and PTI remain 05 biggest players with 68.3% market share
3
• 2 Insurance companies (PVI Insurance and Samsung Vina) and 2 Reinsurance companies (PVI Re and Vina Re) are rated by A.M. Best
4 • Total direct insurance income ~ $1.14bn
5 • Average loss ratio: 44.8%
6 • Average growth: 5.4% compare to 2012
Consolidated figures: Exchange rate (USD/VND): 21,100
23
Source: Association of Vietnamese Insurers (AVI)
Growth in market share since inception
The local market remains dominated by five major players (i.e. PVI Ins, Bao Viet, Bao Minh, PJICO and PTI). In which, PVI Insurance is nº1
Corporate insurance company in Vietnam
Vietnam Non-life Insurance market
As at 31st
December 2013
PVI Ins21.2%
Bao viet22.8%Bao minh
9.7%PJICO8.2%PTI
6.4%
Samsung Vina4%
Others 27.7%
Vietnam non-life market share in 2013
4.2% 11.5% 13.0% 18.3% 19.7% 18.6% 20.3% 20.6% 20.5% 20.5% 21.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
1996 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
PVI Ins Others
24
PVI Insurance remains dominant over certain industrial insurance lines with diversified industrial client base
Energy Marine Engineering , Property & Casualty
Industrial Insurance lines
PVI Insurance
100%
Source: Association of Vietnamese Insurers(AVI)
PVI Insurance;
40,01%
Bao viet; 23,79%
Bao minh; 9,54%
PJICO; 10,40%
PTI; 2,05%
Others; 14,22%
PVI Insurance;
44%
Bao viet; 10% Bao minh;
5%
PJICO; 4%
PTI; 3%
Others; 34%
Vietnam Non-life Insurance market
25
Vietnam Life Insurance market As at 31st December 2013
1
• 16 Insurance companies and 232,024 agents
2
• Prudential, Bao Viet, Manulife, Daiichi remains 04 biggest players with 69% market share
3
• Total Annualized First Year Premium for 2013 ~ $335.5 mil
4
• PVI Sun Life established in June 2013 is nº3 with 14.30% market share behind Prudential (21.67%) and Bao Viet (21.44%) for 2013 AFYP
5 • Average premium per contract: ~ $380
6 • Average AFYP growth: ~34% compare to 2012
Consolidated figures: Exchange rate (USD/VND): 21,100
26
Source: Association Vietnam Insurance (AVI)
The local market remains dominated by six major players (i.e. Prudential, Bao Viet, Manulife, Daiichi, AIA and ACE Life. In which, PVI Sunlife newly
established in June 2013 is targeting to be among top 5 by 2015
Vietnam Life Insurance market
As at 30th
September 2013
Market share in Life insurance
Prudential; 25,20%
Bao Viet; 23,19%
Manulife; 12,53%
Daiichi; 8,10%
AIA; 6,86%
ACE Life; 5,21%
Others; 18,91%
27
PVI Holdings
(formerly known as PVI) in brief
1 • Established in 1996
2 • Owners’ equity: 288.15m USD
3 • Total Asset: 544.54m USD
4 • Total staff: 1,929
5 • A.M.Best ratings B+ 2013 (Positive) for PVI
Insurance and for PVI Re
6 • Independence Medal Award (17.12.2013)
7 • Strategic partner – Talanx
(Parent company of Hannover Re & HDI Gerling)
Capital Contribution
PetroVietnam; 35,50%
Hdi Gerling; 31,82%
OIF; 11,58%
PVcomBank; 6,23%
Others; 14,87%
Consolidated figures: Exchange rate (USD/VND): 21,100
28
Major shareholders
PetroVietnam The largest and most powerful economic
group in Vietnam.
OIF A wholly owned investment arm of
Oman Government, who manages a
diversified direct investment portfolio.
Talanx Group The 3
rd largest insurance group in Germany and
the 8th
largest insurance group in Europe. O
IF
(11.5
8%
)
PetroVietnam
(35.5%)
29
PVI current structure
In 2011, PVI has successfully transformed from one single insurance entity into a financial and insurance group, which includes a parent
company, two insurance and reinsurance subsidiaries, a life insurance joint venture and a fund management company…
PVI Holdings
Market leader in non-
life insurance in
Vietnam
Close ties with many
Vietnam industrial
companies
Independent
reinsurance company,
one of two existing
licenses in Vietnam
Strong support from
Talanx/PVI/ PVN
Leverage resources
from PVI/ PVN
Cross-selling to
employees of industrial
clients
Manage cash flows and
investments of PVI
Group
Leverage investment
opportunities in PVN
Group
PVI Insurance PVI Reinsurance PVI Sun Life PVI Capital
Existing
To-be-established
30
PVI Insurance …In which, PVI Insurance is a wholly owned subsidiary who inherits all rights and obligations of the former PVI related to its non life
insurance businesses.
Insurance
Oil and Gas Insurance
Marine Insurance
Engineering Insurance
Property Insurance
Liability Insurance
Aviation Insurance
Motor Vehicle Insurance
Voluntary Medical Insurance
Medical Expenses and Emergency
Insurance
Agriculture Insurance
Others
Reinsurance
Inward Reinsurance
Outward Reinsurance
Insurance services
Risk Management Consultancy
Survey, Inspection, Loss Adjustment
Claim Compensation & Subrogation Market leader in non-
life insurance in
Vietnam
Close ties with many
Vietnam industrial
companies
PVI Insurance
Majo
r li
nes o
f b
usin
esses
31
PVI Insurance Our international network
31
Through the strategic partnership between PVI Holdings and Talanx Group, the 3rd largest insurance Group in Germany, PVI has
formally participated in global service position.
Talanx Group has offices in 150 countries around the world;
The Group companies are active under various brand globally;
HDI- Gerling is currently offers insurance services abroad over 36 countries through primary insurance units
of Talanx Group.
PVI Insurance is a very important Vietnamese partner to large international reinsurers and markets, such as Hannover Re,
Lloyd’s, Munich Re, Swiss Re.
Currently, PVI is the only local insurer to accept foreign risks including risks in Singapore, Malaysia, Japan, Russia and new
markets such as North Africa, Latin America.
32
Diverse and high-quality customer base
32
Technip
Consotium
Nippon Oil MODEC
ConocoPhillips
BP
Chevron
Petronas
Talisman Energy
KNOC
Multinationals/ NOCs
PetroVietnam
EVN
VINACHEM
Vietnam Airlines
Service Flight Corporation
Coal & Mineral Group
Gazprom
Zarubezhneft
Uzbeneftegar
Idemitsu Oil & Gas
Sumitomo
Huyndai E&C
Posco E&C
Government/ public sector Multinationals/NOCs
33
Gras Savoye in Vietnam, pioneering the Brokers’ Market • Starting a representative office in 1993, Gras Savoye has
been the first 100% foreign Broker installed in Vietnam • April 2013, Gras Savoye Willis Vietnam celebrated its 20
years of presence in Vietnam • 2014, we are a leading player in Vietnam with offices in Ho
Chi Minh city and in Hanoi
3. The risk culture in Vietnam: A broker’s perspective
34
Snapshot at GSW Vietnam • From a start up to a 140-person group, combining 5
nationalities and 2 companies in Vietnam • Market leader in arranging Liabilities, Business
Interruption, Construction and Employee Benefits insurances ; as well as specialised in tourism, banking and manufacturing industries
• We focus on Risk and Quality placement, and believe in Execution
3. The risk culture in Vietnam: A broker’s perspective
35
Risk Culture, history and experience • Where insurance comes from ? the oldest existing example
of an insurance contract, dated 23 October 1347, is a marine cargo insurance from Genoa in Northern Italy
• When did modern insurance started in Vietnam ? 1963 the state-owned Bao Viet was established in the north, principally to cover marine cargo risks; 1993 with the decree No 100/CP, heralding the development of a modern insurance market
Young industry as well as a new culture based on 50
years of experience and 25 years of Market Economy
3. The risk culture in Vietnam: A broker’s perspective
36
Risk Culture, 20 years of change • Risk is traditionally understood in Vietnam, however
generally self insured • Corporate Risks are not all well identified and segmented
• The economic transition to Market Economy has pointed
out the need to protect Corporate assets and the P&L • The rapid development of Private Investment has been
fuelling the non life insurance market development
3. The risk culture in Vietnam: A broker’s perspective
37
3. The risk culture in Vietnam: A broker’s perspective
Insurance Market
Growth (%) 2005 2006 2007 2008 2009 2010 2011 2012
Cambodia 12% 44% 19% -3% 24% 19% 21%
Laos 122% -30% 69% -18% 26% 49%
Thailand 13% 6% 5% 3% 20% 15% 27%
Viet Nam 16.10% 16.72% 28.27% 33.30% 25.63% 24.11% 20.41% 11.16%
GDP Growth
(annual %) 2005 2006 2007 2008 2009 2010 2011 2012
Cambodia
13.25%
10.77 %
10.21%
6.69 %
0.09%
5.96%
7.07 %
7.26 %
Laos
7.11 %
8.62 %
7.60 %
7.82 %
7.50 %
8.53%
8.04 %
8.20%
Thailand
4.60 %
5.09 %
5.04 %
2.48%
(2.33) %
7.81%
0.08 %
6.49 %
Viet Nam
7.55 %
6.98 %
7.13 %
5.66 %
5.40%
6.42 %
6.24 %
5.25%
Source: World Bank
Growth compared in Vietnam, Thailand, Laos and Cambodia
38
3. The risk culture in Vietnam: A broker’s perspective
Premium per
capita ($US) 2005 2006 2007 2008 2009 2010 2011 2012
Cambodia
0.81
0.89
1.27
1.48
1.42
1.73
2.03
2.43
Laos
1.49
3.24
2.23
3.68
2.97
3.67
5.35
Thailand 38.65 43.39 45.76 48.20 49.81 59.77 68.79 86.96
Viet Nam
4.23
4.94
6.20
7.95
9.14
10.38
11.44
12.44
Vietnam compared
Insurance penetration (GWP/GDP) Average Premium per Capita
Market
Penetration 2005 2006 2007 2008 2009 2010 2011 2012
Cambodia 0.17% 0.17% 0.20% 0.20% 0.19% 0.22% 0.23% 0.26%
Laos 0.31% 0.55% 0.32% 0.42% 0.32% 0.33% 0.42%
Thailand 1.40% 1.40% 1.20% 1.20% 1.30% 1.20% 1.30% 1.60%
Viet Nam 0.60% 0.62% 0.67% 0.68% 0.74% 0.78% 0.74% 0.71%
39
Risk in Vietnam, areas of concern • Cat. Risks : Flood, Typhoon • Pol. Risks : Concession • Property : Fire, Construction, others … • Liabilities : emerging Liabilities such as D&O, PI,
Product
3. The risk culture in Vietnam: A broker’s perspective
40
3. The risk culture in Vietnam: A broker’s perspective
Natural Hazards:
Vietnam is exposed to typhoons and tropical storms moving from the East Sea which are
regular occurrence between the months of July and November (typhoon season) each year.
These storms are usually accompanied by extensive flooding and it is not unusual for rail and
road links to be cut and flight schedules to be disrupted.
41 41
3. The risk culture in Vietnam: A broker’s perspective
Flooding is a common occurrence in Vietnam and normally follows as a result of
typhoon activity. Some of the most important recent events are shown below.
42
How the Corporate Sector addresses Risk ? • Cat. Risks : Surveys / Insurance Risk Transfer / Self
Insurance • Pol. Risks : Self Insurance • Property : good 24/7 presence on site, Insurance
Risk Transfer, limited Risk Management • Liabilities : Self Insurance / Insurance Risk Transfer
3. The risk culture in Vietnam: A broker’s perspective
43
Risk Culture, Imported Risk Management • Quick learners have integrated RM from Foreign
Corporations
• RM requirements from foreign Lenders / Partners /
Clients have influenced Vietnamese Companies
behavior
• Legal and Compliance requirements to the Banking
Industry are developping a Risk Management culture
3. The risk culture in Vietnam: A broker’s perspective
44
How Brokers influence the Risk Culture in Vietnam ? • Participate actively to matching Risk Exposure and
Insurance Solutions • Importing international solutions to local Corporations • Providing innovative answers to New Local Risks • Assistance in the transition from insurance purchasing to
Risk Assessment, and then to Risk Management, in Providing Risk Consulting
3. The risk culture in Vietnam: A broker’s perspective
45
The Challenge
• No formal guidance on risk management from the authorities as well as in the standards
• Disconnection for the vietnamese enterprises between risks management and insurance; the risk management is limited to legal and compliance risk
3. The risk culture in Vietnam: A broker’s perspective
46
Conclusion • New Culture vs. Emerging Risks, Insurance is 20 years old
while market economy started 25 years ago • No clear guidance and framework for Risk Management,
but rather good local practice • Disconnection between Risk Assessment and Insurance
purchase • Brokers re-connect Risk and Cover, through Risk Profile
and insurance coverage explanation • Foreign Coporations bring to Vietnam an imported Risk
Culture
3. The risk culture in Vietnam: A broker’s perspective
47
1. Enterprise Risk Management Framework We focus only on listed companies in Vietnam across industries: -Financial Services Sector: some have ERM framework in place (ACB, HSC, PVI) - Non – Financial Services Sector: Vinamilk - Maturity level: low to medium - ERM framework is run manually - Not familiar with ERM standard eg ISO 31000, COSO ERM, risk professional (risk manager, chief risk officer)
4. The risk culture in Vietnam: A risk manager’s perspective
48
2. Risk Governance - Most of companies does not have Board Risk Committee, Executive Risk Committee to oversee risk management practice - Poor corporate governance practices often have poor risk management skills and vice versa - Most of companies does not have risk management function and risk manager or execute as leading practice - ERM definition is new toward companies and don’t know how to run risk management process systematically with a holistic and integrated approach - In a certain degree risk management is run with a silo approach and poor risk culture
4. The risk culture in Vietnam: A risk manager’s perspective
49
3. Current Stage of RM in Vietnam Challenges: - More complicated laws and regulations - Unstable global and local economic environment - High expectation from consumers for quality of goods and products with competitive price - Tough competition from multinational companies in Vietnam - Challenges from being a member of Trans-pacific Agreement (TPP)
Insufficient investment in risk management leading to business failure from root causes:
4. The risk culture in Vietnam: A risk manager’s perspective
50
3. Current Stage of RM in Vietnam (cont’d) - Imbalance between risk and return for investment and development projects - Do not have Planning, Budgeting and Forecasting process in place - High liquidity risk when accept loans are key for capital expenditure - Supply chain risk is extremely high - High NPL in banking sector
4. The risk culture in Vietnam: A risk manager’s perspective
51
4. Future perspectives of RM in Vietnam -Implementation of ERM framework at listed companies as a requirement by law - Have a robust ERM program with higher maturity level of risk management - Risk Management is a key component of good corporate governance and risk governance - Understand and recognise the important role of Risk Manager and Chief Risk Officer in Enterprise Risk Management process - Respect the three lines of defense in risk governance process (Business Risk Owners, Risk Management and Internal Audit)
4. The risk culture in Vietnam: A risk manager’s perspective
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