In our global business environment, a sophisticated understanding of risk throughout the organisation is vital. With this in mind, the upcoming Airmic conference puts the profile of risk at the top of the agenda;
It has already been an eventful year in risk management. Only a few weeks into the year, the long awaited Insurance Bill received Royal Assent, implementing much needed reforms to modernise and simplify insurance contract law across the UK.
The reforms will impact firms’ day to day operations in business insurance, consumer policy wordings and the consequences of fraud. Originally felt that it may potentially impede on the competitiveness of the UK insurance market, it is now seen as vital in order to ensure the law keeps up with the modernisation of the insurance sector.
The arrival of the new Act is just one of the examples of the work carried out among the risk and insurance sectors to together raise the profile of risk, to arm the industry’s professionals with the tools that will equip them for the challenges that lie ahead – challenges that risk association Airmic says will require a rethink in risk leadership if businesses are to navigate today’s increasingly complex world, and mitigate the threat of the next crisis.
According to the report Tomorrow’s Risk Leadership, just published by global business think tank Tomorrow’s Company, boards are failing to navigate today’s increasingly complex risks, which is potentially resulting in loss of value and eroding resilience in times of crisis, and bringing into question the issue of leadership throughout these complex times.
Commenting on the findings, John Hurrell, chief executive of Airmic, the UK association for risk managers and insurance buyers, said: “While companies are usually experts at managing their core risks, all too often the management of risk remains a siloed operation, detached from strategy.”
The association says the risk leader should report directly to the board, and be in a position to influence the strategic direction of the business. This individual will need a high level strategic view of the risks faced by his or her organisation, operating amid range of disruptive scenarios in an increasingly interconnected corporate environment, and dealing with an unprecedented pace of change – all the while continuing to deal with the more traditional industrial risks like business interruption and supply chain risk, natural catastrophe, fire and explosion.
But for all these risks, raising the profile of terrorism and political risks has been identified as among the most relevant. According to the World Economic Forum’s Global Risks report, the biggest threat to the stability of the world in the next 10 years comes from the risk of international conflict.
Conflict, geopolitical and societal risks have dominated headlines already this year, bringing them sharply into focus for the businesses with exposures that may be impacted, with a particular emphasis on global supply chain risk management.
Emphasising another dominant risk, concern abounds over a skills shortage among cyber risk management professionals. According to UK government figures, 81% of large UK businesses and 60% of small companies suffered a cyber security breach last year. The profile of this risk has now certainly reached the corridors of power, with cyber risk now a significant element of the government’s National Security Strategy – its most recent undertaking a cyber insurance initiative designed help firms get to grips with cyber risk; to establish cyber insurance as part of firms’ cyber toolkits and cement London as the global centre for cyber risk management.
Another high profile risk that Airmic has sought to tackle is that of reputation. To this end, the association is working with the Reputation Institute to explore ways in which risk managers and the insurance industry can improve their handling of reputation. The two parties aim to develop a framework setting out an agreed definition of reputational risk and an understanding of its drivers and what can be done to mitigate and insure against it.
Raising the profile of risk is at the heart of the work carried out by Airmic, and is indeed the theme of this association’s annual conference – due to be held in Liverpool, UK on 15th-17th June. Also on the agenda at the association’s annual gathering are environmental risk management, claims trends and emerging risks, financial loss and business interruption, employee risk management and global programmes.