Our research spanned the megatrends elaborated in the report. While there were clearly identified peaks and troughs in certain pillars, one resounding truth was the interconnectivity of factors.
Megatrends do not exist in isolation, they perpetually change and are changed by one another.
In response, companies need to take a critical look at where risk management fits into the board level agenda. Is it a tick box exercise or a core part of the strategic agenda? Risk management has a critical role to play in assisting companies with growing unpredictability.
Our research spanned the megatrends elaborated in the report. While there were clearly identified peaks and troughs in certain pillars, one resounding truth was the interconnectivity of factors.
Megatrends do not exist in isolation, they perpetually change and are changed by one another.
In response, companies need to take a critical look at where risk management fits into the board level agenda. Is it a tick box exercise or a core part of the strategic agenda? Risk management has a critical role to play in assisting companies with growing unpredictability.
• How much time and focus do the senior executive teams and board spend on understanding, assessing and discussing risks through the year?
• Is the time spent discussing risks and mitigation strategies commensurate with the potential impact of that risk?
• If not, why not? To what extent is the team’s thinking more or less influenced by frequency than severity? What would one have to believe for a risk and associated scenarios to become a reality? How are short term and long-term dynamics managed?
The thought process triggered by the above questions might highlight the unconscious biases that may be shaping the risk discussion and where it sits on a senior team’s agenda as well as inform different and better approaches.
Increased volatility and uncertainty will require a more in-depth conversation around risk, supported by modelling, scenario planning and more granular information. Risk will not go away, but it will change. The best we can do is be informed, prepare and be resilient.
• How much time and focus do the senior executive teams and board spend on understanding, assessing and discussing risks through the year?
• Is the time spent discussing risks and mitigation strategies commensurate with the potential impact of that risk?
• If not, why not? To what extent is the team’s thinking more or less influenced by frequency than severity? What would one have to believe for a risk and associated scenarios to become a reality? How are short term and long-term dynamics managed?
The thought process triggered by the above questions might highlight the unconscious biases that may be shaping the risk discussion and where it sits on a senior team’s agenda as well as inform different and better approaches.
Increased volatility and uncertainty will require a more in-depth conversation around risk, supported by modelling, scenario planning and more granular information. Risk will not go away, but it will change. The best we can do is be informed, prepare and be resilient.
Even before ‘coronavirus’ became the dreaded catchword around the world, the writing was already on the wall – 2020 was set to be a year of heightened unpredictability.
The UK general election of December 2019 might have settled the Brexit question, but uncertainty over the post-transition arrangement between the UK and the EU remains, with the risk of a no-deal scenario still a possibility. Meanwhile in the US, voters will decide whether President Donald Trump will win another term in office, while its trade wars with China and the EU will continue to hamper global trade and economic growth.
The Covid-19 pandemic has brought uncertainty to a whole new level. While
there is much debate as to whether governments and businesses could have been better prepared for the outbreak of Covid-19, it has had the effect of exacerbating trade-related risks, people risks and cyber risks.
As the UK moved into lockdown in March, our survey respondents were most concerned about business interruption following a cyber event in terms of the principal risks they face today, the loss of reputation and brand value, and the failure of operational resilience, while diseases and pandemics was placed just fourth on the list.
While the coronavirus outbreak is the overriding preoccupation of risk managers today, what the findings point to is that the Covid-19 crisis is manifesting itself through the megatrends and medium-term risks such as trade-related risks, people risks and cyber risks.
Even before ‘coronavirus’ became the dreaded catchword around the world, the writing was already on the wall – 2020 was set to be a year of heightened unpredictability.
The UK general election of December 2019 might have settled the Brexit question, but uncertainty over the post-transition arrangement between the UK and the EU remains, with the risk of a no-deal scenario still a possibility. Meanwhile in the US, voters will decide whether President Donald Trump will win another term in office, while its trade wars with China and the EU will continue to hamper global trade and economic growth.
The Covid-19 pandemic has brought uncertainty to a whole new level. While there is much debate as to whether governments and businesses could have been better prepared for the outbreak of Covid-19, it has had the effect of exacerbating trade-related risks, people risks and cyber risks.
As the UK moved into lockdown in March, our survey respondents were most concerned about business interruption following a cyber event in terms of the principal risks they face today, the loss of reputation and brand value, and the failure of operational resilience, while diseases and pandemics was placed just fourth on the list.
While the coronavirus outbreak is the overriding preoccupation of risk managers today, what the findings point to is that the Covid-19 crisis is manifesting itself through the megatrends and medium-term risks such as trade-related risks, people risks and cyber risks.
The research also surveyed 1,300 business leaders from across the UK, France, Spain, Germany, Italy, and the Nordic countries to examine how prepared businesses felt they were for the future.
According to the Index, the world is a less predictable place for businesses. Almost all of the ‘least predictable years’ in the Index have occurred in the past 20 years, with the majority during the past ten years. Interestingly, the research also showed that periods of unpredictability come in five-year cycles and the next peak was expected to hit in 2020.
The research also surveyed 1,300 business leaders from across the UK, France, Spain, Germany, Italy, and the Nordic countries to examine how prepared businesses felt they were for the future.
According to the Index, the world is a less predictable place for businesses. Almost all of the ‘least predictable years’ in the Index have occurred in the past 20 years, with the majority during the past ten years. Interestingly, the research also showed that periods of unpredictability come in five-year cycles and the next peak was expected to hit in 2020.
Periods of unpredictability seem to be cyclical because of the nature of macro-economic measures and electoral cycles. Nevertheless, the implications of growing unpredictability for business are many and varied, and can be felt and indeed driven by the megatrends discussed in this report. Unpredictability could lead to more volatile earnings, given uncertain demand and potentially higher costs. Climate change is already exposing assets and supply chains to more intense storms, floods and rising sea levels. Just more complex, regulations, governance and reporting requirements are increasing. Businesses and their senior managers are being held more accountable for their actions, evidenced by increased litigation and regulatory scrutiny for companies and their directors. Stakeholder expectations of corporate behaviour and ethics are also changing.
The QBE Unpredictability Index findings strike a chord with the Airmic member research, which shows increasing concern among risk managers for political and social developments, as well as broader technological changes and climate change.
Periods of unpredictability seem to be cyclical because of the nature of macro-economic measures and electoral cycles. Nevertheless, the implications of growing unpredictability for business are many and varied, and can be felt and indeed driven by the megatrends discussed in this report. Unpredictability could lead to more volatile earnings, given uncertain demand and potentially higher costs. Climate change is already exposing assets and supply chains to more intense storms, floods and rising sea levels. Just more complex, regulations, governance and reporting requirements are increasing. Businesses and their senior managers are being held more accountable for their actions, evidenced by increased litigation and regulatory scrutiny for companies and their directors. Stakeholder expectations of corporate behaviour and ethics are also changing.
The QBE Unpredictability Index findings strike a chord with the Airmic member research, which shows increasing concern among risk managers for political and social developments, as well as broader technological changes and climate change.
Three in four businesses QBE spoke to felt positive about their ability to deal with unpredictable events, but only 29% had risk management plans in place for such events, while even less (17%) carried out stress tests.
The Airmic Resilience and Transformation Model, introduced in the 2018 publication Roads to Revolution, lays out eight principles for achieving resilience in the digital age.
They include the proactive principles seen in resilient organisations that operate an exceptional risk radar focused on emerging risks, as well as the reactive principles seen in resilient organisations that review and adapt to changes and adverse events.
Furthermore, transformational organisations additionally require specific focus on protection and enhancement of the reputation the organisation. This can often result in more successful crisis management, which is pertinent in this time of the Covid-19 pandemic. When successfully achieved, it can build the reputation of the organisation by demonstrating the quality of management and governance capabilities within the organisation.
Three in four businesses QBE spoke to felt positive about their ability to deal with unpredictable events, but only 29% had risk management plans in place for such events, while even less (17%) carried out stress tests.
The Airmic Resilience and Transformation Model, introduced in the 2018 publication Roads to Revolution, lays out eight principles for achieving resilience in the digital age.
They include the proactive principles seen in resilient organisations that operate an exceptional risk radar focused on emerging risks, as well as the reactive principles seen in resilient organisations that review and adapt to changes and adverse events.
Furthermore, transformational organisations additionally require specific focus on protection and enhancement of the reputation the organisation. This can often result in more successful crisis management, which is pertinent in this time of the Covid-19 pandemic. When successfully achieved, it can build the reputation of the organisation by demonstrating the quality of management and governance capabilities within the organisation.
That is where businesses and organisations can take a leaf out of QBE’s Unpredictability Index. If waves of unpredictability indeed continue to occur in five-year cycles, it provides a timeframe for them to map out their risk horizon and consequently their investments into measures to control those risks and megatrends.
That is where businesses and organisations can take a leaf out of QBE’s Unpredictability Index. If waves of unpredictability indeed continue to occur in five-year cycles, it provides a timeframe for them to map out their risk horizon and consequently their investments into measures to control those risks and megatrends.
Preparation is the key to building resilience. Organisations that survive and succeed in an environment of enhanced unpredictability will be those that are best prepared.
This article is an extract from the Airmic report: Top risks and Megatrends 2020.
Preparation is the key to building resilience. Organisations that survive and succeed in an environment of enhanced unpredictability will be those that are best prepared.
This article is an extract from the Airmic report: Top risks and Megatrends 2020.
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