Critical Business Risks in 2025 and How to Mitigate - Insights from Marsh - Ep. 203

Hi, welcome back to the chemical show. So today's episode is a compilation of interviews that I had with the risk professionals at Marsh.

Victoria, for coming. We're excited that you're here and able to witness what our clients get out of this because there's so much collaboration and interest and ideas shared.

Hi, welcome back to the chemical show. So today's episode is a compilation of interviews that I had with the risk professionals at Marsh.

The value is getting people to connect. After the ideas are shared on the stage, getting people to talk about them, explore their thoughts with their peers and with their clients, for example, or their peers, their, their

partners.

their brokers.

important, so it's really cool. So Steve, let's talk a little bit about you and your role at Marsh. What do you do within Marsh and the chemical

chemical practice? So, I lead the chemical practice, as you said. chemical risks are unique and they're different from others. And so our industry organization makes sure that we have specialists that can help companies assess either their financial risks, their operational risks, their legal risks and their reputational risks and help to lay those out to make sure that, leaders and boards of directors are aware of what they're facing and steps that they can do to mitigate. Those kinds of risks.

What are the key trends and drivers that chemical companies are facing today?

Some of the key trends, we, we can't include all of them here, but certainly the macroeconomic conditions that are causing companies to reevaluate their portfolios in a strategic way. Digital transformation, cyber risks that are, that are starting to crop up. and becoming evident. There's talent, right? Talent is always top of mind for chemical industry and, uh, you know, rail is another big issue. Shipping, supply chain, as, as you've said, right? The decade of

is the decade of supply chain, absolutely.

That's also a big risk and, and we're seeing it from, the port strike that was just averted, seemingly averted today, to, um, shipments by rail of clients that, Really are being asked to carry a lot more liability than they have been in the past.

Yeah. Companies are facing a lot of different things. I am speaking with Susan Gonzalez, who is the managing director for Marsh based here in Houston and one of the leaders of the North American summit that we're here at today. So super great

conversations that have been taking

place already

this

past day. And Susan brings a lot of energy and leadership to the energy practice. So, Susan, really excited to speak with

with you. for having

Absolutely. So, let's just start with a little bit about you. Can you just tell us a little bit about you and what you do at Marsh? Sure.

So the easy part

is I'm a

the Houston office and I'm also the leader for the energy practice leading the property and

casualty brokers as as

as well as the service team.

tell us maybe a little bit more about what Marsh does. in this space, because, we haven't really talked yet about, you know, who is Marsh and what is your role with energy and power companies? So, Marsh really works as an insurance and risk space, as an advisor to companies. And, you know,

the nuts and bolts of it really comes in the transactional piece of it, where we're

it,

their insurance, that they need for, whether it's property, casualty, financial lines, environmental, all the different things, that's really the nuts and bolts of it. Cause you have to have a policy. You have to have your contracts, you know, things like that. But also we want to be a consultant to our clients to make sure that they understand like what's on the forefront.

and I think one of the challenges, of course, as a business leader is figuring out where to apply limited resources because every company and every leader ultimately has limited resources to figure out what those priority areas are. And you guys have hit on a lot of priority areas, right? And so I think that's also maybe just the opportunity and the challenge.

Yes, and I'd say that, like, some of the life lessons that were learned from the conference this week is, there's a lot to be learned from

collaboration.

And where we do the best

Marsh,

engaging with our clients is where they allow us to have influence over the multiple departments that you may need to to collaborate together to come up with solutions. for example Rob Lee mentioned that you can't just have your IT Department, he's really working on systems, maybe Administrative things versus your, the operational side of the technology. Those divisions have to talk to each other, We can get.

Hi, I am with Milan Taylor, who is the global head of energy and Chemicals from Mercer. Milan led a really great Panel. earlier today, talking about talent and more across the energy and chemical industries. Milan, thanks for joining me today.

Thank you for taking the time to invite me onto your show.

So tell us a little bit about yourself and Mercer.

So Mercer is, a very large, uh, people risk Consulting uh, firm. and My role as the global energy and chemicals Leader is to work with our colleagues and our clients to resolve for some of the most complex issues as businesses transform. Yeah, Awesome. And I know that you've recently done a survey of global HR leaders, talking about what the enterprise challenges are for 2025. Can you talk about that?

So, so

side of the same coin, so focus on cost management, focus on growth. And then the third key priority for the year is all about simplification. So I think that's a tacit recognition. the processes are over engineered, over complicated. And so it's about going back to your roots, of keeping it simple, but delivering safely. so a pretty big enterprise agenda for the year.

So Milan, those seem like three priorities that maybe work against each other. Is that true? Or how do you. see those working together?

look, I think that the chemical industry is, it's all about, you know, coming out of its down cycle. it's all about ensuring that current shareholders and stakeholders are rewarded, and it's about ensuring that the businesses as they transform themselves. Have that sustainability to deliver. So I guess that the cost management is about delivering today. The Growth is about delivery today. And Simplification is making sure that they can deliver in the coming years as well.

and how do you see people tackling that? Like if you think about recommendations that you and Mercer are bringing to the table with your clients. What does simplification mean in this environment?

you look through the lens of people, this expresses itself through talent. And I think the simplification side is Let's look at, our, the way we hire people, right? Are there ways that we can cut out duplicative? Processes of their ways we can ensure that we have more quickly, so we can deliver more effective into organizations. It's looking at taking on a I can we actually adopt a I and can that augment what we're trying to do is an organization.

Hi, I am here with Amy Barnes, who is the Head of Climate and Sustainability for MARSH Globally, and she's leading some really engaging discussions here at the symposium on climate and climate adaptation and probably a few other things, so we're going to be talking about that today. Amy, thanks for joining me.

Delighted to be here.

So let's talk a little bit about Adaptation. Because I know that's a big topic of conversation this week. What does that mean, exactly? And what are you guys doing about it?

Okay, well,

to say to

everybody that this week we're in the middle of the Palisade Fire in

in California.

Absolutely. Devastating event. Devastating for so many people personally. And if you listen to any of the newscasters or the politicians who are speaking, they are saying that this is an unprecedented event. And that is what we're thinking about when we think about climate adaptation. We are thinking about changes in extreme weather. It can be

Torrential

that gives rise to more extreme flooding than we've seen

than we've seen before.

before. It can be the droughts. If we think back to 2021, we saw the droughts in the Mississippi River and cargo not able to leave the U. S. because of a lack of water. It can be Milton Helene coming further inland than we've ever seen before and areas who haven't been exposed to hurricane force winds before. So, how are organizations adapting to changes in extreme weather?

and

and making sure that their organizations are resilient and can thrive in those environments.

Yeah. And how does Marsh play into this then?

the most obvious place that we start is thinking about physical assets. We're probably known

best for inuring people's property. So that physical

asset damage.

And that's

what a lot of people do when they think about climate change. They think about how is my asset going

to be impacted? Am I gonna be more susceptible to

Do I need to worry about wind?

But we're expanding that

conversation. We say we even within your site, there's more that you need to think about. You need to think about your asset and how you protect that. You really need to think about your people because people are exposed to climate change. Now there's more risk. There's risk on site and there's risk at home.

dehydrated,

Your judgement is in pairs and you start to make mistakes.

Yeah. And starting the day that way, starting outweighing on a back foot is can't free. Good.

more, more forklift trucks crash. You

have

incidents and accidents because of that. So they can have small interventions like putting up hydration stations as soon as people get into the office and say, it's hot out there, have a drink before you start work. Really small, low cost interventions. So thinking about the people within your footprint as

Yeah. But we also need to

think about emergency response. does happen in extreme weather, can you do the things that you thought you could do?

do?

I referred to the Palisades fire earlier and we're already seeing they don't have water where they need it.

And

so can we still respond to an event? You could have a fire, doesn't need to be a fire caused by a wildfire. You could have an ordinary explosion at a site, but in a drought scenario, will you still have access to water

Yeah, yeah.

so we help clients think about all those things within their footprint, but.

But, more. Yeah.

Assets don't operate in isolation, they operate within a wider system. So, how are companies thinking about their vulnerabilities to exposures in the supply

chain?

So in the supply chain, the food and beverage industry are really thinking very deeply about this already because anyone in agriculture is very weather exposed and people who particularly like chocolate who podcast, last year was a really bad year for cocoa

I've heard that. And so recently, like recently, I'm like, what the heck? I need my chocolate. Exactly. And it's harder

find, and it's certainly the prices are going up. Chocolate isn't hard to find, relax.

but, and so

how are you thinking about those climate vulnerabilities? And some of the works that we've done with, uh, with clients in that industry are saying, will we still be able to say made with a hundred percent Italian Durham wheat or made with a hundred percent Italian tomatoes because the changing climate. And there was a client in Florida. Don't ask me for a date some years ago and part of their USP is it made from 100 percent Florida orange

juice.

That year there weren't Florida oranges. They had to go to Mexico. The whole branding strategy has changed. So supply chain is one thing. If we think about infrastructure in the intro, I talked about the Mississippi River.

Yeah. Um, Panama Canal was a big issue last year with a lack of water and lack of rain. Hang on,

Hang on, you're not a climate expert and you're telling me about all these climate

do know chemicals and shipping, but yeah. No, but that's my point. It's affecting everyone everywhere. But

How are your, what dependencies do you have on infrastructure? So we've got the shipping industries and the connectivity. We've also got power. Could your power

supply be

be disrupted because of climate change?

And

And then there's water. Every industry on the planet uses water for manufacturing and especially chemical industries. So one of the things when we think about water scarcity, we often think about the farmers.

But,

did you know that in Taiwan, for the past three years, the government have been paying farmers not to plant rice so they have enough water to make semiconductors? Now, I don't think many people are realizing that our high tech industries have got these extreme water dependencies that we're not factoring in. So we're helping clients to understand, and there are more factors in the ecosystem as well.

and then insurance

becomes the next form of intervention.

Yeah. Makes sense. Alright, so I am here with Randall who is the SVP of the Emerging Risk Groups in Charlotte and, Randall and I have having really great

conversation about some

the emerging risks and how, frankly, the

unexpected things that become risks, right? Which I guess is the whole point of it being emerging.

to be talking a little bit about that

and more. So, Randall, thanks for joining me.

So we're going focus in a little bit on supply chain, but before we do, emerging risk. That be a bit of everything. So what is that? falls into that category? Yeah, I think about emerging risks. There's maybe two categories two ways of

thinking about it.

One, we think about things that are really net new.? That AI starting

AI is starting

ai.

this. Yeah.

an emerging risk for everyone. Then there are

other things, climate change, cyclone risk,

geopolitical risk, that are maybe not necessarily net new, but are emerging in the sense that they're dynamic in the way that are impacting organizations, is evolving rapidly, right? And so we think of them in that category of emerging risk and needing different treatment than maybe more traditional risks like, you know, pure, like natural catastrophe issues that are kind of known and understood.

makes sense. That's interesting. So, Steve, I've been asking your colleagues, and I'm going to ask you the same question. You know, if there was one place, one action that chemical leaders should take as we start 2025, what would that

be? There's so many. And I think to summarize what I'm thinking about the chemical leaders should do is don't let 2025 stand in the way of your next five years. Because the

planning that has to be

done now to continue to evolve and continue to respond to the different conditions that are there is going to be hard. 2025, of course, there, there's going to be pressure to perform as always and every year. But don't let that stop you from looking to the future.

And so, you know, if you were, meeting with a chemical industry leader tomorrow, which maybe you will be, what's the advice? that you would give them as they sit here at the beginning of 2025 when they're thinking about their business and their risks and their risk portfolio? I

think every CEO, CFO has on their mind How are we going to grow? Everybody. including me. How are we going to find talent and take care of the talent that we have. And, What's on the horizon.

If you were going to advise a business leader to do one thing related to their people in 2025, what would it be?

So organizations need to have a really effective employee value proposition. Why work for the organization? For that C suite, I would say ensure that the say and the do, are aligned because Younger employees walking in, being sold on a promise that isn't delivered, will be walking right out your door.

If you were advising a chemical executive on, you know, sitting here today or tomorrow when you go back to your day job, What's one thing they can be doing and should be doing or thinking about here in 2025 as it relates to energy, energy transition risk, etc. Yeah, I think,

one, I always say, it always depends on who we're talking to and what their issues are. Every single one of our clients presents different issues. But at a high level, you know, for the chemical industry, I would say probably one of the most important things that they could be doing, particularly executives, is exactly what Peter Huntsman did yesterday. We have to. to be communicating across multi, multi, in a multi dimensional fashion.

the

informed we'll be when we tell policy makers what it is we're looking for,

So if there was one thing, and there's a lot of things that you covered here, um, if there was one thing that you recommend to business leaders that you work with to do as it relates to climate in 2025, what would it be? Where would they start?

So if I think about what good looks like for me personally in my career, good for me personally, my career means making sure my boss never has a surprise. And so I think, make sure you don't have surprises. Do the work now to anticipate. The changes that can come, so you can start to plan for them. No business has the capex to respond to all these issues straight away. We can't make those changes straight away.

so Randall, for the chemical leaders listening to this, there was one thing they could do in this space of either emerging risk or supply

chain, what would

would they start in 2025?

start? Again, great question. I think they've probably done a lot of horizon scanning and have a sense for what risks are out there, but it's really putting a finer point on that. And I'd say identifying those top scenarios and really pressure testing, how that could impact their business plans and using that to start to refine, the way they build their forecast and go to market and organize their, uh,

uh, maybe build

Thanks for joining us today. I hope you enjoyed that episode. If this is something that really stood out for you. Two things. Number one, leave a comment, a review would really appreciate that. And secondly, share it with a colleague or friend who really needs to know more about the topics we cover on the chemical show. And as today's topic is about risk and risk management and the things that they can do in their businesses. So thank you for joining us today.