Speaking exclusively to StrategicRISK, Swiss Re’s head of sustainability, emerging and political risk management, Martin Weymann warns risk managers of the more prominent threats they need to beware of and how to begin preparing for them.
Geopolitical risks, technological advancements and climate change are three of the most relevant emerging risk areas for corporates, according to Martin Weymann, head of sustainability, emerging and political risk management at Swiss Re.
The evolving nature of geopolitical risks
Speaking exclusively to StrategicRISK, Weymann says: “Geopolitical risk used to be more pronounced in emerging markets. But more recentlyit has been a source of volatility for the business environment across the world. Today, the international system has become multi-polar with the emergence of new power centres in populous nations including China and India and the resurgence of a more active Russia.”
He highlights some of the recent political tensions such as Brexit, the Korean peninsula and the on-going trade war and adds: “Big corporates will be affected by a more volatile business environment. In certain situations, even the rule of law may be challenged.”
Technological developments such as artificial intelligence, robotics and algorithms are another emerging risk. In the age of algorithms and automation, corporates face deep risks as well as shining opportunities. “These are non-classical threats that mean a fundamental shift in the industrial world,” Weymann forecasts.
“Algorithms will profoundly change our future. Remember that just a good ten years ago the smartphone did not exist,” he adds.
He predicts that most sectors from automotive, maritime, aviation and many others will have to confront the new world of artificial intelligence and the internet of things proactively – or be run over by it.
Climate change: heatwaves, droughts and wildfires
On climate change, Weymann highlights that a single season of extreme weather events can’t be directly attached to climate change. However, the recent Northern Hemisphere summer with heatwaves, droughts and wildfires e.g. in regions such as Northern America, Mediterranean area and parts of Asia – as highlighted in the 2017 SONAR report – is to be expected more frequent in future decades, according to climate models.
Such events can have direct effects on the industry. As an example, some corporates may not have enough cooling water for their industrial processes or others need to face major losses in the agricultural sector. At Swiss Re we have to monitor these trends carefully as we offer a multitude of risk transfer products for climate-related weather risks.
Dormant threats come alive
But it is not just these new developments that pose serious threats. Looming over the horizon lies the dormant threat of old technologies such as asbestos. Over much of the industrial world people are still exposed to the harmful effects of the substance – but the reckoning won’t come for 30-50 years despite the almost 100 years of early warning. “That’s the latency period between exposure and the potential development of a sickness,” Weymann explains. He fears that without determined actions by governments, the industry and the insurance sector, there will be new waves of asbestos related cases in the future.
Strong risk foresight, collaboration and risk mitigation actions needed
In order to be ready for the future, corporates need a strong risk foresight or emerging risk function which helps to navigate the ever changing risk landscape. Swiss Re Corporate Solutions believes that risk managers must collaborate widely in order to identify, assess and manage emerging risks. “It’s essential that companies act and engage with each other and interact with a broad range of stakeholders to understand the risks and find solutions to emerging risk pools,” says Weymann. “The risk dialogue helps us and our partners to understand the risks and take appropriate risk mitigating actions. We have to share the knowledge as we do it through our SONAR reports with new emerging risk insights every year. Swiss Re has a saying: ‘We’re smarter together.’”