The pandemic, global warming and now the war in Ukraine have forced organisations to rethink how they keep up with the speed of new risks emerging, the profile of risks changing, and how risk management practices must adapt as a result. Gone are the days when a board reviewed its principal risks on an annual basis. Managing risk today must be a dynamic and continuous process – as well as on every board meeting agenda. It cannot be written up as part of a glossy annual report then put away for the rest of the year. Even in a well drafted report, there’s often still too much focus on the short term, risk registers and heat maps, and the downside of risk, with thinking longer term and the upside or opportunities well-managed risk can offer, relegated to the back seat.
We’re all familiar with geopolitical risks but tensions between states that impact the normal and peaceful course of international relations has typically been in the distance. Three months after Russia invaded Ukraine, we’re facing the most severe geopolitical threat since World War Two and an escalation and unpredictability in the turn of events which has and will continue to touch us all.
As the frequency of global turbulence increases, the approach and the techniques used to manage risk are changing. Organisations should step up their use of scenario analysis to understand the emergence and the consequences of risks. They can then use the outputs to inform ambiguities and identify any connectivity between risks, and as the basis for designing controls – including response plans and rehearsals for when things go wrong.
The situation in Ukraine is a generation-defining crisis, with sweeping implications for organisations in the UK and around the world. The Airmic Ukraine Resource Page now has almost 100 entries of interest and seeks to provide a risk radar to keep members and the wider risk and insurance community informed. Organised under key themes, the site includes:
1. Cyber and information security
2. Economic impact and outlook
3. Geopolitics and sanctions
4. Insurance
5. People and travel
6. Supply chain disruption
7. General resources on the Ukraine crisis
The Airmic Ukraine Resource can be found here: https://www.airmic.com/ukraine
The economic damage from the conflict in Ukraine will contribute to a significant slowdown in global growth in 2022, and will exacerbate inflation. The longer and deeper the crisis, the greater the risk that the impact on the insurance industry will shift from a balance sheet event to one with a negative impact on reserves. This year the industry had started to show some green shoots of recovery following more than two years of higher premium rates and restrictions in cover, but this scenario will see a continuation of tough times for some customers who had hoped for some easing in the negative pressure on their insurance covers.
In response, and especially for larger customers, there will be continued growth in self-insurance including through in-house or captive insurance companies, and a quickening in the turn towards alternative sources of risk financing capital. However, it is still all about managing risk. Managing risk well should be a differentiator for insurers – even in these turbulent times, well managed risks and typically in turn, well managed businesses, should be rewarded.
Printed Copy:
Would you also like to receive CIR Magazine in print?
Data Use:
We will also send you our free daily email newsletters and other relevant communications, which you can opt out of at any time. Thank you.
YOU MIGHT ALSO LIKE