The majority of large and mid-size organisations worldwide are failing to anticipate and model key emerging risks, a new report from insurance firm Marsh suggests.
Based on a survey of nearly 1,000 organisations, Marsh's inaugural Risk Resilience Report highlights an inadequate response to threats posed by pandemics, cyber attacks, regulatory changes, emerging technologies, climate change, and geopolitical risks.
Although 75% of respondents said that their risk management and insurance buying 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 is despite these organisations overwhelmingly identifying the six key emerging risks as increasingly critical, long-term threats to their success.
Marsh said that this suggests a significant perception gap, with firms’ risk management functions prioritising short-term threats over those that are high severity but lower frequency, leaving them vulnerable to immediate and long-term disruptions.
“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, CEO of Marsh.
“Our survey findings show that more work needs to be done when it comes to anticipating and modelling key emerging risks as they develop. Resiliency is a journey that organisations need to prioritise.”
The report explains how resilient organisations are able to anticipate risk, minimise losses, and quickly resume business as usual following an event, gaining a competitive advantage over less-prepared peers.
This involves four common steps: anticipating important risk issues, connecting risk management to business strategy, avoiding gaps in the perception of preparedness, and measuring relevant data.
As new challenges continue to emerge, and the risk landscape grows increasingly complex, Marsh said that these steps can transform risk management and support organisations in becoming more resilient.
Doyle added: “As our report outlines, effective strategies to build more resilient businesses will not only facilitate faster recovery, but also increasingly become a competitive advantage.”
Image credit: iStock
Author: Chris Seekings