Proactive risk management and preparing for emerging risks and trends on the horizon

Kimon de RidderChief Risk Officer, Insurance, Bupa

Below is an insight into what can be expected from Kimmon’s session at Risk Evolve 2024.

The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.

  1. What proactive risk management strategies can organizations adopt to effectively anticipate and address emerging risks and trends on the horizon?

There are a number of strands to this: First, applying a clear framework that sets out the criteria for assessing the risk landscape and identifying and evaluating emerging risks against a consistent set of criteria. This is important for the purposes of prioritising and ensuring consistency in approach, analysis and response to emerging risks. Second, ensuring that internal discussions, led through the Risk Committee, enable the debate of emerging risks to be had in order to test and challenge assumptions, consider the framing of the emerging risks, and to ensure that a lens of judgement and experience is brought into the assessment. Finally, ensuring that there is a constant awareness of evolving trends and developments by maintaining an active strategy of discussions with consultants and experts, both within and beyond financial services.

  1. How can institutions effectively leverage horizon scanning to prepare for future risks?

We have enough examples of issues that have crystallised into crises from the past. I think the trick, however, is not to assume that past experience is a proxy for future reality. By this, I mean it is important to acknowledge that the same set of circumstances from the past can mutate into different outcomes in the future. Take, for example, another pandemic occurring. I doubt it will play out in the same way that we saw with Covid. The virus may be slightly different, and the effects on the population and the government response may differ based on past experience. So the trick for me, in leveraging horizon scanning to prepare for future risks, is not to assume the risk will manifest in only one way. Having a few variations of possible outcomes, and maintaining a range of assumptions, enables an organization to map out a likely range of possibilities and then determine likelihoods against these. This leads to better debates and more informed decision-making.

  1. What are some of the emerging risks you foresee on the global financial landscape?

We are in a year with potential for phenomenal electoral change, with around half of the world’s population (~4 billion people) going to the polls in governmental elections in more than 50 countries. This presents a myriad of potential outcomes leading to changes in regulations, differences in approach being adopted to different sectors, and new incentives being created to deliver against national growth agendas. All of these are likely to have an impact no matter what sector you operate in or what your global footprint looks like. Layered onto this electoral uncertainty are the ongoing geo-political tensions: Russia-Ukraine; Israel-Hamas; China-Taiwan; Iran-backed Houthi piracy in the Red Sea. All of these have the potential to manifest themselves as supplier risks and supply chain delays; third party risks and concentration risks; reputational risks; cyber risks; and operational resilience issues.

  1. How can organizations better identify gaps in resources and expertise to enhance the effectiveness of their risk analysis processes?

One way to do this is to map your resources against recent risks which have already crystalised, and assess whether the risks manifested themselves as a direct result of a specific gap in expertise – or whether it was simply because resources were focused on the wrong / different risks. The thing with a Risk Function nowadays is that the environment of potential risks is mutating at a faster pace than ever before. This means that half the battle is keeping up and the other half is spent adjusting focus and resources to deal with newly emerging risks. It’s just the way it is, but it is an exciting journey to navigate.