Despite widespread agreement across businesses on the dangers posed by emerging risks, the vast majority of organizations continue overlooking and underappreciating the impact these threats could have on a company.
Road to Resiliency
To help reduce the damages caused by emerging risks, resiliency is key. To begin that journey, the insurance brokering and risk management firm suggests the following four steps:
1. Expected the unexpected: The pandemic touched every business, but many struggled more than necessary because they failed to fully anticipate the extent of its impact. In fact, just 25% of Marsh survey respondents said they use scenario-based modeling across the enterprise or comprehensively to determine the potential impact of emerging risks. Further, 45% said they use scenario-based models only somewhat or in a limited way.
Organizations can better prepare by keying on certain metrics. This includes measurements of risk aggregation and interdependences across a value chain, which can help slow the degree of contingent business interruption risks. Along these lines, information on supply chain partners and early warning crisis-event metrics are also vital.
2. Connect risk & strategy: By not anticipating risks or aligning them with corporate strategies, many businesses are limiting their ability to effectively respond to new risks. However, most organizations aren’t bringing risk management and long-term planning together. A big driver behind this is an inability for a majority of companies is an inability to deploy cross-functional collaboration, which can increase transparency into potential new risks and help in preparing better response plans.
3. Avoid gaps in perception of preparedness: Cognitive bias, or believing you have control over random events, leads to a disconnect between stated risk management strategies and how a business prioritizes and rates the impact of certain risks. Put simply: Organizations are overplaying their hands when it comes to how preparedness and the ability to respond, as well as recover, from an event.
To avoid the illusion of control, companies should conduct a thorough review of the risk terrain and make an honest assessment to if the organization has the necessary resources to pull through a shock event.
4. Measure what matters: Despite all the buzz around big data, organizations still struggle to consistently apply metrics to the business. However, by deploying a steady approach, companies can better measure their exposures.
Source – Propertycasualty360.com