By Valentina Pasquali
Our level of preparedness is not always up to par with the challenges we may be suddenly confronted with.
Still recovering from the Haiti earthquake
Photo Credit: ARINDAMBANERJEE / Shutterstock.com
This is a hard-learned lesson: The global economy is still reeling from several years of unforeseen disturbances, from the collapse of Wall Street in 2008 to the ongoing sovereign-debt crisis in Europe, from earthquakes in Haiti (2010) and Japan (2011) to last year’s Arab Spring upheavals.
“Emerging risks tend to be low-frequency, high-impact events,” says Alan Roth, Chief Risk Officer at Advanced Fusion Systems. “We know they could happen, but we don’t know when, and they are infrequent enough that people are reluctant to spend money dealing with them. Yet if you don’t do some preparation, you could be a major loser when they occur.”
The Emerging Risk Survey, a joint production of a Rudolph Financial Consulting collaboration with the Joint Risk Management Section of the Society of Actuaries, Casualty Actuarial Society and Canadian Institute of Actuaries, was launched in 2008. “We are not trying to anticipate any crisis that is going to come,” says Max Rudolph of Rudolph Consulting. “But we are trying to get people to think further out in their time horizon than they might otherwise.”
Concerns about financial volatility, failed and failing states, cybersecurity, a Chinese economic hard landing and an oil price shock topped the 2012 chart. For the first time, a large majority of risk management professionals (84%) feel they have more input into their companies’ strategic discussions. “We are getting risk managers involved earlier in the decision-making process,” says Rudolph, “which I think can only add value to firms in the long run.”