The power of risk management

Before I joined Husqvarna Group, I worked in security management, which included risk and project management, for the Swedish National Courts. I had a strong ambition to work with security management in a company with global operations, so the job focused on loss control and security at Husqvarna Group was spot on.

The former risk manager was a great mentor and encouraged me to embrace Husqvarna Group’s entrepreneurial spirit by taking on responsibilities in other areas. So, in addition to my role with security, I got involved in enterprise risk management and property and cargo insurance.

Talent management is a priority in the Husqvarna Group, and there are lots of opportunities to grow. When the risk manager retired, I got an offer to become acting head of group risk management for a year to broaden and strengthen my risk management and leadership skills. The acting role turned into the position I have today.

The major risks for Husqvarna Group include the digital transformation disrupting our business models, the speed with which battery technology is changing the traditional petrol product industry and supply chain disruptions triggered by unexpected “black swan” type events.

It does. Ten years ago, we manufactured very few battery products. Today, battery products are everywhere. From a business standpoint, we’ve adapted by testing and developing loss control procedures for battery technology, especially in warehousing and safe product testing practices. Thanks to some research conducted by FM, we learned that the driver of lithium battery fires is the plastic casings. Fortunately, our storage locations were already equipped to protect plastic products.

The property-related risks we see are traditional, including fire and critical machinery breakdowns. We’re always striving for operational excellence, which results in changes in production flow and storage within the sites. As a result, we end up with a lot of new construction and renovation projects. These changes very often add risks that need to be managed, including hot work, electrical work and the potential increase of fire load.

It goes without saying that cyber risk is a challenge for any manufacturer. As more systems and networks converge, and as more machinery becomes automated, the cyber risks increase. We’re working on a project now at one of our production sites with the ambition of building Sweden’s smartest manufacturing facility, enabled by digitalization. Connecting automated manufacturing processes requires cyber security aspects to be integrated as part of the design. FM has always been unique in its cyber coverage, and cyber enhancements recently added to the policy are very relevant to us.

A major part of our business is seasonal. Our products need to be out on the market at certain times of the year. The demand for robotic lawn mowers in the winter is very limited. If one of our manufacturing facilities was down during our peak production time, it would be a catastrophe since we would not have the ability to make up for those missed sales opportunities.

Our sales are also affected by weather. If there is a heavy winter, we’ll sell a lot more snow blowers, but we don’t want a warehouse full of snow blowers if it’s a mild winter. We have to be precise in our forecasting, and must maintain a flexible and resilient supply chain.

The site visit is a perfect opportunity for us to get an independent signoff that the mandatory risk control activities are in place. We appreciate that the recommendations from risk engineers are based on deep experience and offer time-tested solutions for how to avoid a catastrophic loss. We view this feedback as critical input for our understanding of exposures and prioritization of investments in risk mitigation.

I have a strong belief that risk management must be integrated as part of the core business activities, including strategic planning, budgeting and day-to-day work. Management controls must be implemented and adapted to ensure cost-effective mitigations for common business risks, like production stoppages, quality issues or security breaches, etc. Insurance should serve as a backup to protect the balance sheet from catastrophic losses.

The priority for Husqvarna Group is to meet or exceed our strategic objectives, and our group strongly believes that risk management has an important role to play.

When you make investments in new production facilities or new lines of business, there is an upside. You expect it will make you more money. You’re not going to make extra money by making loss control investments. We in risk management have to show how risk improvements are going to protect the business income we already have. The management team believes that those are investments worth making.

Husqvarna Group property loss prevention activities are driven by the desire to ensure we meet customer demands and protect business income. We recognize that reaching HPR status will reduce the probability and impact of a disruption, which help us achieve both these goals. We determine which production sites should pursue HPR status by understanding how each individual site contributes to business income and our overall strategy. Last year, we finished a three-year project to get our Robotic Lawn Mower manufacturing site HPR.

We have 31 production sites all over the world, and warehouses in even more countries, so the FM WorldReach® capability is very important to us. It clearly defines how the master policy provides for differences in local policies related to conditions, coverage, deductibles, etc. I feel that the mutual ownership model is very positive, reflected in FM’s approach to claims handling and the membership credit.

Cyber is probably the biggest worry. With cyber, you are exposed to malicious threats. Someone in the world is actively trying to figure out how to hack your company and cause a disruption, and their methods are becoming more creative and sophisticated every day. That’s not the case with other perils like fire or machine breakdown.