Is Detecting Emerging Risks A Priority? It Should Be
Companies generally are not making it a priority to identify and plan to manage their emerging risks, the off-radar unknowns that could seriously impact operations and bottom lines, according to the 2015 Excellence in Risk Management* survey.
Only 27% of risk professionals surveyed said that identifying emerging risks would be a priority in the coming year. That runs counter to a clear message we’re hearing from boards of directors, which are concerned about the potentially devastating impact from “what’s around the corner.”
A starting point for identifying emerging risk is to ask such questions as:
- How are emerging risks identified at the global, industry, or organizational level?
- Who evaluates them?
- What discussions occur around them?
At the same time, consider some common best practices related to emerging risks. Participants from several focus groups related to our Excellence survey suggested:
- Leveraging your company’s risk committee. If one doesn’t exist, create one.
- Challenging conventional thinking by sharing reports like Global Risks 2015 from the World Economic Forum.
- Initiating discussions about how global risks could create volatility in your organization in the future.
- Looking for viewpoints across the company.
- Conducting scenario planning. Checklists have their place, but involving operations, finance, human resources, and others in scenario evaluation can lead to actionable insights.
By taking those steps, you should be better positioned to plan for emerging risks. According to the survey, only 39% of respondents said their organizations were effective or very effective at planning for emerging risks. Yet 56% said they were effective or very effective at identifying emerging risks. Further increasing the ability to identify emerging risks and bridging the gap to planning for them will better enable you to withstand events that may bring substantial enterprise volatility.
* The 2015 Excellence in Risk Management survey and report were joint projects of Marsh and RIMS.