Businesses across the world are failing to take steps to tackle a range of emerging risks despite the fact that they are aware of the long term threats, according to Marsh.
The broker has warned that a focus on short term problems at the expense of tackling the threat from emerging risks is storing up the potential for significant future threats to businesses.
The warning comes as part of the inaugural Marsh Risk Resilience Report, which found that, despite a broad consensus across large and midsize organisations about the rising threat posed by a range of emerging risks, the vast majority continue to overlook and underemphasise the potential impact of these risks on their businesses.
The conclusions have been based on a global survey of nearly 1,000 organisations. The report highlighted large disparities in the perception of and response to threats posed by pandemic, cyberattack, emerging technologies, climate change/environmental, social, and governance (ESG)-related issues, regulatory changes, and geopolitical risks.
While 75% of respondents to the survey believed that their risk management and insurance buying processes are aligned to their long-term growth strategies, only 25% have a comprehensive or formal process in place to evaluate and model the impact of these emerging risks on their business. This comes despite respondents overwhelmingly identifying these six key emerging risks as increasingly critical, long-term threats to their organisations’ success.
“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 organizations’ preparedness to manage major crises,” said John Doyle, President and CEO, Marsh. “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,” Doyle added. “Resiliency is a journey that organisations need to prioritise.”
Marsh added the findings suggest 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 concludes.
As new challenges continue to emerge, and the risk landscape grows increasingly complex, the report said there is a growing competitive advantage for risk resilient firms.
“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,” said the report.
According to the broker’s Risk Resilience Diagnostic, the move towards resilience involves four common steps and behaviours: anticipating important risk issues; connecting risk management to business strategy; avoiding gaps in the perception of preparedness; and measuring relevant data.
“Together, these steps can transform risk management and support organisations in becoming more resilient,” said Marsh.