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Topics: Risk Management, Strategy
Wimbledon Lessons on Risk Management
Wimbledon tournament reportedly paid $2 million a year for pandemic insurance for the last 17 years (Total: $34 Million)

For this year's cancellation as a result of the Coronavirus, Wimbledon will reportedly receive $141 million from the policy.

The All England Club reportedly updated its Wimbledon insurance policy years ago to include the infectious disease clause following the worldwide SARS outbreak in 2002.

All England Club’s Risk and Finance Sub-Committee have long since insisted on a clause covering epidemics, and the policy has been accordingly upgraded in recent years. The Club’s risk and finance subcommittee is charged with assessing all potential risks to the annual tournament, including global pandemics, terrorist attacks and even the death of a monarch, which would thrust the country into a time of national mourning.

What are your thoughts on this?
Why many organizations (e.g. French, US and Australia Opens) neglected these risks while Wimbledon made sure it was covered?
What can we all learn from this example?
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I know it from long time ago. It was there from Flu-A. Is for that reason I worte in some forums that Corona Virus is not a surprise. Then, as you know, you can consider things like risks or not and according to that you can create the associated strategy. In this case Winbledon Committee consider this risk as low probability-high impact then they selected to transfer it. Is not about others neglected. Is about others do not think it will be a risk that deserves to be taken into account.
...
1 reply by Joao Sarmento
May 12, 2020 3:14 PM
Joao Sarmento
...
Hi Sergio,

Thanks for your inputs.

I agree with your statement as the most probable one:
"Winbledon consider this risk as low probability-high impact then they selected to transfer it. Is not about others neglected. Is about others do not think it will be a risk that deserves to be taken into account."

Based on my experience, I wouldn't be surprised if some major events (as big as these tournaments or bigger) ever considered this sort of risk.

We'll probably see many of these changing their positioning next year :)
Joao -

Perhaps someone in the Wimbledon risk management committee had seen the movie "World War Z" and was thinking about "Black Elephant" scenarios when they negotiated the insurance contract.

The ability to identify but, more important, get stakeholder buy-in to act on such low probability but extreme impact risks requires a combination of the "right" risk managers with cultural support for talking about risks and acting on them.

Kiron
...
1 reply by Joao Sarmento
May 13, 2020 5:13 AM
Joao Sarmento
...
Hi Kiron,

As always, loved your references and quick wit :)

I wonder how many times we see such 'stakeholder buy-in' and a 'combination of the "right" risk managers with cultural support for talking about risks and acting on them'?

How do think this will affect the future? Do you think these risks will be dealt with a lot bigger probability and an even extremer impact?
May 12, 2020 7:37 AM
Replying to Sergio Luis Conte
...
I know it from long time ago. It was there from Flu-A. Is for that reason I worte in some forums that Corona Virus is not a surprise. Then, as you know, you can consider things like risks or not and according to that you can create the associated strategy. In this case Winbledon Committee consider this risk as low probability-high impact then they selected to transfer it. Is not about others neglected. Is about others do not think it will be a risk that deserves to be taken into account.
Hi Sergio,

Thanks for your inputs.

I agree with your statement as the most probable one:
"Winbledon consider this risk as low probability-high impact then they selected to transfer it. Is not about others neglected. Is about others do not think it will be a risk that deserves to be taken into account."

Based on my experience, I wouldn't be surprised if some major events (as big as these tournaments or bigger) ever considered this sort of risk.

We'll probably see many of these changing their positioning next year :)
...
1 reply by Sergio Luis Conte
May 13, 2020 8:19 AM
Sergio Luis Conte
...
You are wellcome. Just to comment, I am ATP/ITF/USPTA Professional Level I Tennis Coach including it I was a professional tennis player so I have to learn a lot about all related tournaments to get my certification (it is hard to get it because it is not enough had been a player. There is a lot to learn from years and take theorical practical exams including it things that are science related to tennis like physic). Then, I am a passionate about this type of topics. In the past when I started with it I interacted with people that were in charge to plan the tornaments like Winbledon, Rolland Garros, Australia, etc. At this time, between other things, there is not tv and the money price was close to "simbolic" so it was possible to talk with them. All this people lived the second world war, time that impacted in very different way to all this tournaments from things like Rolland Garros was a concentration camp to Wimbledon was bombed. This, adding the different way of thinking and behave between French people and British/Australian people, make perceived things in different ways. The same for the owners of the tournaments where some of them are private and others are belonging to government. Wimbledon has an insurance that covers not only pandemic. It covers other things mostly related to all players security and health no matter they are juniors for example. A different way to make things. No one are matter of judment in my personal opinion. Is the same than in companies and organizations. They can select to be ready for unpredictable and unplanned things (like those which did not were impacted because people have to work from home) or not.
I agree with Joao, Others responded different.

There are numerous parts to risk management; identification, analysis, and response. In the case of Wimbledon it was identified, analyzed to be significant in terms of impact and the response chosen was transfer to insurance. This proved to be beneficial in this case.

Had the event been delayed, the impact less significant and the payout reduced the benefit may not have been so obvious. If the cost had been greater than the benefit the decision would not have seem so fortuitous.

Others may: 1) not have recognized the risk, 2) analyzed it to be of lower impact/significance, or 3) decided to absorb the impact.

So, let's not jump to the conclusion that others did not give it appropriate attention or even recognize the risk. Maybe they just took a different path.

That's the challenge of risk management - one size doesn't fit all. Cut-and-paste can be detrimental to the project.
The best thing to learn from this is when planning for emergencies, think of the most outlandish and improbable scenario and plan for that.

Dinosaurs riding meteors coming back to Earth to reclaim it? Sure why not. How would we manage that event? What risks and opportunities exist? What would be the results? Then apply a real world scenario and see how the responses and planning apply.

Kiron mentioned it exactly-a "black elephant". Most people don't believe in them, but they exist. Just like unicorns exist because if they didn't Scotland wouldn't have chosen them to be the national animal.
...
1 reply by Joao Sarmento
May 18, 2020 3:22 PM
Joao Sarmento
...
Hi Ed,

Thanks for your inputs!

Indeed most people don't believe in them, biasing their own thought process, but they are quite real.
May 12, 2020 8:09 AM
Replying to Kiron Bondale
...
Joao -

Perhaps someone in the Wimbledon risk management committee had seen the movie "World War Z" and was thinking about "Black Elephant" scenarios when they negotiated the insurance contract.

The ability to identify but, more important, get stakeholder buy-in to act on such low probability but extreme impact risks requires a combination of the "right" risk managers with cultural support for talking about risks and acting on them.

Kiron
Hi Kiron,

As always, loved your references and quick wit :)

I wonder how many times we see such 'stakeholder buy-in' and a 'combination of the "right" risk managers with cultural support for talking about risks and acting on them'?

How do think this will affect the future? Do you think these risks will be dealt with a lot bigger probability and an even extremer impact?
...
1 reply by Kiron Bondale
May 13, 2020 8:04 AM
Kiron Bondale
...
Joao -

I believe that for a short while at least, risk management spending may increase across industries, but remember that this will also be at a time when companies are trying to recover financially, so they may not have sufficient reserves to do enough.

Where companies need to do a better job is:

1. Harvesting as many of these black elephant risks as possible during identification.
2. Before putting them on watchlists, identify the early warning signs where possible for these.
3. If those signs emerge, be willing to have an open conversation about how to respond to them.

For example, companies in North America could have monitored the news regarding the growing dangers of the pandemic in late December and early January and pre-emptively taken some steps to protect themselves in advance of government actions. Insurance is just one possible response. Others might have been proactively buying shares in companies likely to benefit from a pandemic such as Amazon or Shopify.

Kiron
What about other low probability / high impact risks like the meteor falling on London, the tsunami from north sea underwater slides or just plain consequences from global warming?

They might get some insurance money to cover lost income for some time. But there are indirect impacts on them from Corona, like the coming cultural changes in society, economic downfall, or just the compression in their industry of sports events.

If you have low probability / high impact risks which are prone to be mitigated by insurance, it is still possible that the risk event is lethal as consequences go beyond money.
...
1 reply by Joao Sarmento
May 19, 2020 2:41 PM
Joao Sarmento
...
Hi Thomas,

Definitely these kinds of risks go beyond money... I believe we are just scratching the surface of the true impact of the current pandemic. You've identified some nice ones...

Mitigation by insurance is very nice, but in most cases is like a first-aid care you provide in an accident, in order for the person involved to have a fighting change to recover afterwards.

Thanks for your inputs.
A threat will be assessed differently by every organization, João. On top of that, each organization has a different risk appetite and threshold. You also have to assess whether the monetary compensation for a realized risk makes sense.

All England Club got money that covered the loss of their revenue. (I'm sure a lot of other organizations will suffer from the cancellation.) But what about all other losses? If their supply chain is gone, what will they do next year? If the sports fans stop attending next year, how will this year's money help them?

It will be interesting to see what the All England Club's insurance premium will be for next year.
...
1 reply by Joao Sarmento
May 18, 2020 3:54 PM
Joao Sarmento
...
Hi Stéphane,

Thanks for your inputs.

I'm interested in knowing that as well.
I'm betting on it sky rocketing :(
May 13, 2020 5:13 AM
Replying to Joao Sarmento
...
Hi Kiron,

As always, loved your references and quick wit :)

I wonder how many times we see such 'stakeholder buy-in' and a 'combination of the "right" risk managers with cultural support for talking about risks and acting on them'?

How do think this will affect the future? Do you think these risks will be dealt with a lot bigger probability and an even extremer impact?
Joao -

I believe that for a short while at least, risk management spending may increase across industries, but remember that this will also be at a time when companies are trying to recover financially, so they may not have sufficient reserves to do enough.

Where companies need to do a better job is:

1. Harvesting as many of these black elephant risks as possible during identification.
2. Before putting them on watchlists, identify the early warning signs where possible for these.
3. If those signs emerge, be willing to have an open conversation about how to respond to them.

For example, companies in North America could have monitored the news regarding the growing dangers of the pandemic in late December and early January and pre-emptively taken some steps to protect themselves in advance of government actions. Insurance is just one possible response. Others might have been proactively buying shares in companies likely to benefit from a pandemic such as Amazon or Shopify.

Kiron
...
2 replies by Babita Ram and Joao Sarmento
May 13, 2020 4:50 PM
Babita Ram
...
Thank you for sharing this news.
I am listening to the perspective of all the experts. COVID19 has definitely shaken the world big time, to keep the lesson learned in the forefront of our risk assessment attitude. Question is whether the business, government, and scientist will see the issue or risk with the same lense?

Global pandemic was predicted many years ago, but still, the business & politics did not give enough weightage to prepare itself ahead of time. Similarly, the case for climate change, even with so many markers across the globe because of climate change, all the nations are acting individually rather than seeing it as a global issue.

Coming back to your question the risk management will definitely be the core agenda for the coming years, but how it will impact the risk mitigation plan will depend on who has internalized the current issue to what extent.
May 19, 2020 2:43 PM
Joao Sarmento
...
Hi Kiron,

Great list and great examples.
Thanks for your inputs!
May 12, 2020 3:14 PM
Replying to Joao Sarmento
...
Hi Sergio,

Thanks for your inputs.

I agree with your statement as the most probable one:
"Winbledon consider this risk as low probability-high impact then they selected to transfer it. Is not about others neglected. Is about others do not think it will be a risk that deserves to be taken into account."

Based on my experience, I wouldn't be surprised if some major events (as big as these tournaments or bigger) ever considered this sort of risk.

We'll probably see many of these changing their positioning next year :)
You are wellcome. Just to comment, I am ATP/ITF/USPTA Professional Level I Tennis Coach including it I was a professional tennis player so I have to learn a lot about all related tournaments to get my certification (it is hard to get it because it is not enough had been a player. There is a lot to learn from years and take theorical practical exams including it things that are science related to tennis like physic). Then, I am a passionate about this type of topics. In the past when I started with it I interacted with people that were in charge to plan the tornaments like Winbledon, Rolland Garros, Australia, etc. At this time, between other things, there is not tv and the money price was close to "simbolic" so it was possible to talk with them. All this people lived the second world war, time that impacted in very different way to all this tournaments from things like Rolland Garros was a concentration camp to Wimbledon was bombed. This, adding the different way of thinking and behave between French people and British/Australian people, make perceived things in different ways. The same for the owners of the tournaments where some of them are private and others are belonging to government. Wimbledon has an insurance that covers not only pandemic. It covers other things mostly related to all players security and health no matter they are juniors for example. A different way to make things. No one are matter of judment in my personal opinion. Is the same than in companies and organizations. They can select to be ready for unpredictable and unplanned things (like those which did not were impacted because people have to work from home) or not.
...
1 reply by Joao Sarmento
May 21, 2020 1:08 PM
Joao Sarmento
...
Thanks for your inputs, Sergio!

Nice to know about your tennis career. It's a very enthusiastic sport :)

I agree that culture plays a very big part in the way you behave. The same goes to the fact that the tournament is public or private...
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