As technological advances, climate events, and regulatory shifts reshape industries, risk management is entering an era of urgency and complexity. The Federation of European Risk Management Associations (FERMA) has made it clear: short-term approaches to risk are no longer sustainable.
According to Philippe Cotelle, FERMA board member and chair of the Foresight Committee: “Our report highlights several systemic barriers within the organisation and government that hinder long-term risk management, leading to reactive rather than proactive approaches. These barriers include the prioritisation of immediate gains over future resilience, which is driven by multiple factors, like market pressure, regulatory constraints or personal priorities.”
Cotelle noted that short-termism is linked to behaviour economics. This, he said, includes “bias, such as status quo bias, optimism bias or growth thinking” as well as “an overestimation of the ability of companies to manage risk autonomously, and a tendency to prioritise consensus over critical evaluation.” Cotelle warned against this form of risk mitigation stating: “This is particularly problematic where emerging threats are often developed over extended time. These threats are sometimes referred to as the grey rhinos - hazards of high probability and high impact, which are not addressed until the risk actually occurs.”
FERMA’s report highlighted four interconnected systemic risks that pose a significant threat to businesses today:
The consensus among FERMA leaders is clear: Companies must actively counter short-term thinking to build true resilience. As Cotelle explained “risk managers must establish a longer-term horizon within the organisation and actively counter cognitive bias to threaten resilience at both the company and societal level." Daria Krivonos, CEO, Copenhagen Institute for Future Studies, offered an analogy for organisational mindset stating: “If we fail to deploy long term thinking ahead of time, that is the biggest risk we have, because just the fact that we're saying which is more urgent and which of these can have the biggest impact - the biggest impact will be from the ones we neglect.” She continued: “I usually divide the world into three types of companies: those who get the environment they want, those who don’t get the environment they want but come prepared, and then the last group - which don’t get the environment they want and come unprepared.”
They believe the key actions for shifting from reactive to resilient thinking include:
The FERMA representatives offered several practical suggestions to move from reactive to resilient thinking, starting with a deliberate focus on the future.
“I think a good way to do it is… introduce a space where you discuss only long-term risks,” said Krivonos. “Nothing that is combined with the traditional risk process, nothing that is contaminated by here-and-now operational issues.”
She went on to stress the importance of embedding foresight into business culture: “Engaging in foresight, long-term thinking on a structural level, is a winning strategy. Because the worst thing that can happen then is that you're going to enter something that is not favourable - but you’ll be poised to harvest the opportunity or at least mitigate the risks ahead of time.”
Sebastian Wieczorek, CEO of Mantix, reinforced the importance of making long-term thinking actionable: “For example, you can do scenario mapping. What we did was for each of the different risks that we described, we gave an example. We hope that is a good first start, a good set of tools that helps people to start.” Paulino Fajardo, head of disputes, EMEA, at Herbert Smith Freehills, concluded with a reminder that perspective is key: “I think that you need to think outside of your company, have an abstract approach, and then come back to your company.”
While FERMA’s insights primarily target risk managers, they carry significant implications for brokers. As risk advisors, brokers are uniquely positioned to help clients navigate systemic risks - from geopolitical shifts to climate change and human capital challenges. FERMA’s CEO, Typhaine Beaupérin, told Insurance Business that brokers must act as risk advisors: “The role of the broker is evolving - moving beyond its traditional function as an insurance intermediary to encompass a broader range of risk advisory services. ”This risk management shift creates significant opportunities for brokers. As clients face mounting systemic risks - ranging from geopolitical shifts and technological acceleration to climate change and human capital challenges - brokers can serve as critical enablers of long-term resilience.
As trusted advisors, brokers can play a pivotal role in guiding clients toward long-term resilience by:
