Broker chief executive emphasises that ‘resiliency is a journey that organisations need to prioritise’
Organisations are underemphasising the impact of emerging risks, such as climate change and cyber attacks, on their business, despite also acknowledging that these up-and-coming risks are “increasingly critical, long-term threats to their organisations’ success”, according to broker Marsh.
Its Marsh Risk Resilience Report, which surveyed nearly 1,000 organisations globally, found that only 25% of companies have a comprehensive or formal process in place to evaluate and model the impact of emerging risks on their business.
Examples of these emerging risks include threats posed by Covid-19 pandemic, cyber attacks, emerging technologies, climate change and environmental, social and governance (ESG)-related issues, regulatory changes and geopolitical risks.
Despite this finding, Marsh’s report also noted that “respondents overwhelmingly” identified these “key emerging risks as increasingly critical, long-term threats to their organisations’ success”.
Marsh suggests this indicates “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,” the report, which was published yesterday (19 May 2021), continued.
Around 75% of respondents believe their risk management and insurance buying processes are aligned to their long-term growth strategies, however.
Being risk resilient
Marsh’s report further explained that risk resilient firms can garner greater competitive advantages.
It said: “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.”
According to Marsh Risk Resilience Diagnostic – a tool that analyses the impact and interrelation of emerging risks across an organisation’s complete value chain – the journey towards resilience involves four common steps and behaviours. These are:
- Anticipating important risk issues.
- Connecting risk management to business strategy.
- Avoiding gaps in the perception of preparedness.
- Measuring relevant data.
Speaking on the report findings, John Doyle, president and chief executive of Marsh, said: “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.
“As our report outlines, effective strategies to build more resilient businesses will not only facilitate faster recovery, but also increasingly become a competitive advantage.
“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.”