Effective risk resilience is increasingly correlated to a firm’s viability and growth potential, finds Marsh
Despite a broad consensus across large and midsize organisations about the rising threat posed by a range of emerging risks, the vast majority continue to overlook and underemphasise the potential impact of these risks on their businesses, according to a report from Marsh.
“The COVID-19 crisis, the temporary closure of the Suez Canal, major cyber-attacks, and other recent events, have all exposed the fragility of global systems and serious shortcomings in organisations’ preparedness to manage major crises,” said John Doyle, president and CEO, Marsh.
“Effective strategies to build more resilient businesses will not only facilitate faster recovery but also increasingly become a competitive advantage.”
Six key emerging risks
Based on a global survey of nearly 1,000 organisations, the report highlights large disparities in the perception of and response to threats posed by pandemic, cyberattack, emerging technologies, climate change/environmental, social, and governance (ESG)-related issues, regulatory changes, and geopolitical risks.
While 75% of respondents to the survey believe that their risk management and insurance buying processes are aligned to their long-term growth strategies, only 25% have a comprehensive or formal process in place to evaluate and model the impact of these emerging risks on their business.
This comes despite respondents overwhelmingly identifying these six key emerging risks as increasingly critical, long-term threats to their organisations’ success.
The findings suggest a significant perception gap with firms’ risk management functions prioritising short-term threats over those that are high severity but lower frequency.
This potentially leaves them vulnerable to immediate and long-term disruptions to their operations, assets, and revenue streams.
A risk resilient organisation is able to anticipate risk, minimise losses, and quickly resume business as usual following an event, gaining a competitive advantage over less-prepared peers through growth opportunities seized during times of operational and/or financial stress, the report notes.
“Our survey findings show that more work needs to be done when it comes to anticipating and modeling key emerging risks as they develop,” added Doyle. “Resiliency is a journey that organisations need to prioritise.”