Many risk professionals believe that forecasting risk will not get any easier in the next three years and emerging risks will most likely arise in the areas of cyber attacks, regulation and human resources.
According to a new report published jointly by insurance broker Marsh and the risk management group RIMS, while risk professionals say they are increasingly relied upon to assess emerging risks, they say they face organizational and other barriers to providing that critical view “around the corner.”
Nearly half of survey respondents — 48 percent — said that forecasting critical business risks will be more difficult three years from now, with another 26 percent saying it would be the same.
This year’s annual Excellence in Risk Management found that a majority of respondents — 61 percent — see cyber-attacks as the likely source of their organization’s next critical risk. This is followed by regulation, cited by 58 percent of the respondents, and talent availability, cited by 40 percent of the respondents.
“Whether emerging risks are on your doorstep, around the corner, or on the far horizon, they have the potential to catch organizations unaware,” said Brian Elowe, Marsh’s U.S. client executive leader and co-author of the report. “It’s important for risk professionals to maintain awareness of global risk trends, and to make the connection to their organizations’ business strategy.”
Risk professionals generally agree that while identifying emerging risks is important, there is no clearly established framework for doing so.
For example, a majority — 60 percent — of the risk management respondents said they use claims-based reviews as one of the primary means to assess emerging risks, compared to 38 percent who said 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,” he said.
Survey respondents also cited several barriers to understanding the impact of emerging risks on their business strategy and decisions with lack of cross-organization collaboration ranking first 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, vice president, 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 risk executives in January and February 2016.
Findings from the survey were released at the RIMS 2016 Annual Conference & Exhibition.