Risk. It’s something that the insurance industry deals with every day, from every angle.
However, a report published by Airmic in collaboration with Marsh and released at the Airmic conference ongoing in Harrogate, has revealed that many organisations are not paying attention to emerging risks.
The report warns that while there may still be economic growth, “times have changed,” and the world is increasingly volatile. This has meant that there are more and more emerging risks that organisations need to consider.
Despite this, the report shows that businesses are still spending most of their time looking at traditional risks, which they feel they have a handle on and can manage.
Many boards are complacent, according to the report, with some thinking of emerging risks as too hard to deal with and others believing that they don’t need to think about them yet.
This is despite the UK Corporate Governance Code requiring organisations to carry out an assessment on emerging risks and address what they are doing about them in their annual report. This requirement, only introduced last year, was pushed for by Airmic, but may not have had long enough to have had an impact yet.
“Companies haven’t quite clocked yet that they really need to address the emerging risks with as much gusto as the principal risks,” John Ludlow (pictured), CEO of Airmic said. “Because the emerging risks are actually more interesting, they are actually more about the future environment.”
They may be more interesting, but they are more difficult as well. As the report states, emerging risks are harder to define and quantify, and do require more work to assess and map. Three years ago, an issue like Brexit was an emerging risk, and it is now front and centre impacting many organisations.
Ludlow said that when boards actually sit down and talk about emerging risks it may require some tough talk about what changes need to happen to their company in order to mitigate those risks, which is why the conference theme is all about solutions as well as problems.
The theme for the Airmic conference this year is ‘New World, New Solutions’, something that it seems many organisations are yet to grasp.
In his opening address to the conference, Ludlow stressed the point about changes happening in risk management, speaking about a revolution driven by technology.
“We are already seeing the revolution manifest itself,” he said. “Think how start-ups are disrupting financial services and the insurance industry, or the dominance and impact of Amazon on the high street.
“This revolution is different to previous ones because of the speed of change and the magnitude of the rewards and consequences.”
While it is a risk manager’s job to try and predict what will happen, as Ludlow said, no-one could have predicted that a single drone could have caused so much trouble at an airport for so many days.
“On the one hand, these changes give rise to unprecedented opportunities – on the other, to threats and vulnerabilities that we could not even have imagined five years ago,” Ludlow stated.
The speed of technology and change is rapid, and businesses that are not looking at emerging risks are going to fall far when something big happens.
“There’s a key message for Airmic and its members in this scenario,” Ludlow said. “Organisations that embrace risk and technology will find it easier and safer to take advantage of all the opportunities out there. Risk and reward go together. They are two sides of the same coin.”
The Airmic Emerging Risks Guide is available on the Airmic website and includes practical information designed to help risk professionals.