Emerging risks are a vital issue, but few risk professionals are expected to look more than three or four years ahead

Emerging risks

Most Australian risk managers are asked to look at emerging risks for their senior management, but few look further than three years out.

Some 83% of respondents to the StrategicRISK Australia risk management survey said reporting emerging risks was part of their remit.

But when asked how many years into the future they were required to look, 78% chose four years or less.

A hefty 36% chose three years (see graph, above).

Berkshire Hathaway Specialty Insurance (BHSI) Australasia president Chris Colahan wasn’t surprised. “There’s no doubt that the focus [for emerging risks] is going to be aligned to the financial timetable that an organisation manages itself to,” he said.

“It’s very rare that you’d find an organisation that has investors and stakeholder groups that are interested in any more than a three-year time horizon.”

BPAY risk manager Francesca Dickson agreed. “Things move so quickly,” she said.

“That’s not to say that companies can’t have longer-term plans if they think it’s relevant, but in terms of risk, I think [three years] is correct.”

In a recent report, Swiss Re group chief risk officer Patrick Raaflaub said: “Risk management is not just about managing risks in the present. It is about anticipating future ones.” The insurer, which identified 21 new emerging risks, said that in the next three years, those likely to have the greatest impact on business are the emerging market crisis and the “great monetary experiment”.

Beyond this, the report suggested internet fragmentation could have the most severe impact. It noted: “International negotiations are currently under way to agree on how the internet should be governed, but no consensus or international treaty has emerged yet. While the debate is still under way, there is a chance that disconnected national and regional nets will become more common.”

BHSI’s Colahan said the insurance industry had an opportunity to deliver more long-term solutions for emerging risks: “If there was a greater supply of long-term risk transfer solutions, there might be more demand. The longest policy period we’ve written since we came into the market is 21 years.”

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