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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, according to the inaugural Marsh Risk Resilience Report published today by Marsh, the world’s leading insurance broker and risk advisor.
Based on a global survey of nearly 1,000 organizations, the report highlights 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 believe 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 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.
As new challenges continue to emerge, and the risk landscape grows increasingly complex, the report identifies the competitive advantage that risk resilient firms can gain. A risk resilient organization 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 notes.
“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 and behaviors: 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 resilient, Marsh notes in the report.
More information about the Marsh Risk Resilience Diagnostic and Report can be found at marsh.com.
Marsh’s Risk Resilience Report is based on a survey of around 1,000 Marsh clients conducted in early 2021 across nine regions. Respondents represented more than 36 industries, including manufacturing, energy, real estate, retail, construction, health care, banking and financial services, and professional services The survey's objective was to measure respondents' resilience in six emerging risk areas — climate/ESG, cyber/technology, emerging technologies, geopolitical, pandemic, and regulatory.
Marsh is the world’s leading insurance broker and risk advisor. With around 40,000 colleagues operating in more than 130 countries, Marsh serves commercial and individual clients with data-driven risk solutions and advisory services. Marsh is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people. With annual revenue over $18 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. For more information, visit mmc.com, follow us on LinkedIn and Twitter or subscribe to BRINK.