Advances in technology have done nothing to make it easier for risk professionals to forecast and model emerging risk, a new report from
Marsh & McLennan and RIMS finds.
A survey of risk professionals published in the 13th annual “Excellence in Risk Management” report shows the majority believes forecasting risk – particularly emerging risk – will not get any easier in the next three years. In fact, nearly half of survey respondents (48%) say forecasting critical business risks will be more difficult by 2019. Another 26% says it will be the same.
This year’s “Excellence” survey also asked risk professionals how organizations view emerging risks facing their organizations, and which barriers they face in assessing, modeling and understanding emerging risk.
According to the findings, a majority of respondents (61%) say cyber-attacks are the likely source of their organization’s greatest risk. Another 58% cited regulation, followed by 40% who said it was talent availability.
Brian Elowe, Marsh’s US client executive leader, emphasized the importance of making risk management part of a company’s business strategy.
“Whether emerging risks are on your doorstep, around the corner, or on the far horizon, they have the potential to catch organizations unaware,” Elowe said. “It’s important for risk professionals to maintain awareness of global risk trends, and to make the connection to their organizations’ business strategy.”
The approach risk managers take to identifying risk varies widely, however. The survey revealed that while a majority (60%) use claims-based reviews to assess risk, as many as 38% say they use predictive analytics.
“The widespread use of claims-based reviews means that a majority of organizations are relying on studying past incidents to predict how emerging risks will behave rather than using predictive analytic techniques like stochastic modeling and game theory to help inform their decision making,” Elowe said.
Survey respondents also cited a number of barriers to understanding emerging risks and their impact on business strategy, with lack of cross-organization collaboration ranking firsk among risk professional respondents.
“Lack of collaboration across the organization is still an issue for many risk professionals. On the other hand, breaking down silos has become less of a concern for executives,” said Carol Fox, VP, strategic initiatives for RIMS and co-author of the report. “Tackling emerging risks often requires creative yet pragmatic approaches. It has to encompass internal cross-functional conversations — formal and informal — around the intersection of risk and strategy, senior-leadership engagement, and tapping into external information sources. Risk professionals are encouraged to broaden the scope and collaboration around emerging risk issues within their organizations.”
The
Excellence survey,
Emerging Risks: Anticipating Threats and Opportunities Around the Corner, is based on more than 700 responses to an online survey and a series of focus groups with leading risk executives in January and February 2016.
