Airmic offers solution to neglected emerging risks

Many emerging risks are going completely unchecked as risk managers focus on the more visible and easier to manage risks – or those for which they have more data or control. To help address this, Airmic and Marsh are calling for a new approach to managing emerging risks – indeed a “recalibration” to help rebalance efforts between the management of traditional and emerging risks.

The UK Corporate Governance Code, introduced by the Financial Reporting Council last year, requires that boards specifically address emerging risks alongside principal risks in their annual reports, and to explain what procedures are in place to identify, manage and mitigate them.

To help define, quantify and map emerging risks, a new guide – developed by Airmic and Marsh, and published at the Airmic conference this week – advises that risk managers exchange formal assessments and heat maps for structured, creative discussions across business units. Boards and risk professionals need to “create space to think the unthinkable and speak the unspeakable”, it suggests.

“Consideration of emerging risks is often relegated to the backseat, even though they can result in the biggest shock waves,” explains John Ludlow, Airmic’s CEO. “Three years ago, Brexit was an emerging risk that many ignored. Today we have the international rise in protectionism, trade tensions between China and the US, the impact of climate change, plus many more. There is no excuse for boards to say they did not see these coming but it will require a change in mind set – emerging risks are more art than science.”

Richard Smith-Bingham, director, Marsh & McLennan Insights, added: “Boards must be satisfied in knowing their firms possess the hunger to anticipate a multitude of surprises that could potentially erode long-term value, as well as the operational and strategic agility to enable them to move decisively in emerging crises and position their assets well for the future.”

">Emerging Risks, New World, New Solutions (16pp) provides practical advice including a 12-point checklist, and can be viewed on Airmic’s website.

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