Marsh and RIMS have jointly published the 13th annual Excellence in Risk Management report, which finds that, while risk professionals are increasingly relied upon to identify and assess emerging risks, there remain organizational and other barriers to providing that critical view ‘around the corner. ’ Nearly half of survey respondents (48 percent) said that forecasting critical business risks will be more difficult three years from now; with another 26 percent saying it would be the same.
A survey conducted for the report sought to better understand how organizations view emerging risks facing their organizations and the tools they use and barriers they face in assessing, modeling, and understanding them. According to the findings, a majority of respondents (61 percent) cited cyber-attacks as the likely source of their organization’s next critical risk. This was followed by regulation, cited by 58 percent of the respondents, and talent availability, cited by 40 percent of the respondents.
Based on the survey responses and insights from numerous focus group discussions, it became clear that risk professionals generally agree on the importance of identifying emerging risks, and also that there is no clearly established framework for doing so. More can be done to better identify, assess, and manage the impact emerging risks may have on organizations.
For example, a majority (60 percent) of the risk management respondents said they use claims-based reviews as one of the primary means to assess emerging risks, compared to 38 percent who said they use predictive analytics.
“The widespread use of claims-based reviews means that a majority of organizations are relying on studying past incidents to predict how emerging risks will behave rather than using predictive analytic techniques like stochastic modeling and game theory to help inform their decision making,” said Brian Elowe, Marsh’s US client executive leader and co-author of the report.
Survey respondents also cited several barriers to understanding the impact of emerging risks on their business strategy and decisions with lack of cross-organization collaboration ranking first among risk professional respondents.
“Lack of collaboration across the organization is still an issue for many risk professionals. On the other hand, breaking down silos has become less of a concern for executives,” said Carol Fox, vp, strategic initiatives for RIMS and co-author of the report. “Tackling emerging risks often requires creative yet pragmatic approaches. It has to encompass internal cross-functional conversations — formal and informal — around the intersection of risk and strategy, senior-leadership engagement, and tapping into external information sources. Risk professionals are encouraged to broaden the scope and collaboration around emerging risk issues within their organizations.”
The report is based on more than 700 responses to an online survey and a series of focus groups with leading risk executives in January and February 2016.