Effective ‘risk resilience’ is increasingly correlated to viability, growth potential, and competitiveness
- Published: Wednesday, 19 May 2021 08:08
According to the inaugural Marsh Risk Resilience Report, as new challenges continue to emerge, and the risk landscape grows increasingly complex, the competitive advantage that ‘risk resilient’ firms can gain is increasing.
Marsh says that a risk resilient organization is one that is able to anticipate risk, minimize 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.
The report, based on a global survey of nearly 1,000 organizations, highlights large disparities in the perception of and response to threats posed by pandemic, cyber attack, emerging technologies, climate change/environmental, social, and governance (ESG)-related issues, regulatory changes, and geopolitical risks.
Despite a broad consensus across large and midsize organizations about the rising threat posed by a range of emerging risks, the vast majority continue to overlook and underemphasize the potential impact of these risks on their businesses.
While 75 percent of respondents to the survey believe that their risk management and insurance buying processes are aligned to their long-term growth strategies, only 25 percent 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 organizations’ success.
The findings suggest a significant perception gap with firms’ risk management functions prioritizing 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.
“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 modeling key emerging risks as they develop,” Mr. Doyle added. “Resiliency is a journey that organizations need to prioritize.”
According to the Marsh Risk Resilience Diagnostic, the journey towards resilience involves four common steps: 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 organizations in becoming more resilience.