EMEA companies struggling to manage emerging exposures finds ACE

According to the survey of 650 business executives with a responsibility for risk management, lack of management attention, insufficient human resources and deficient risk management tools and processes are the biggest barriers to effective emerging risk management. ACE's EMEA Emerging Risks Barometer 2013 also finds that supply chain and infrastructure dependency, environmental liability, cyber risk and D&O liabilities are the most feared emerging business threats. Lack of management attention on emerging risks is rated as the top barrier to their mitigation, registering as a concern to 57% of respondents. This is followed by a lack of human resources and skills (46%), lack of risk management tools and processes (40%), lack of knowledge and information about risks (38%), lack of budget (34%) and, lastly, lack of insurance options (13%).hideAndrew Kendrick, President, ACE European Group, said: "Our research suggests that emerging risks have not yet become embedded in board-level discussions on wider risk management issues. 57% of our respondents cite lack of management attention as the biggest barrier, and this leads in turn to the second and third challenges-lack of human resources and lack of risk management tools and processes." "This study also suggests that many senior executive teams could give more attention to the discussion of emerging risk. By setting the right tone from the top, they will be more likely to ensure that their businesses take a more proactive approach towards emerging risk management," he added. ACE said CROs must lead the corporate response to these challenges, monitoring new threats and pinpointing the right issues for management's attention. But, most important of all, managing emerging risks requires a multidisciplinary effort, with all functions working together to address these challenges effectively, it added. "Ultimately, as ever in risk management, it is a question of having the right culture in place, backed by strong governance and best practice processes," said the insurer. The survey respondents were also asked which emerging risks they believe will have the most significant financial impact on their company in the next two years. Top ranked on 45% was supply chain and infrastructure risk. Within this risk area information and technology failure (46%), energy outage or shortage (36%), supply chain disruption (34%), lack of investment in civil infrastructure (30%) and unethical or illegal actions by partners in the supply chain (29%) are seen as the greatest causes of concern. Environmental risk ranks second in the barometer, with 42% categorising it as one of the emerging risks most likely to have a negative financial impact on their business. Nearly three quarters (73%) of firms say their shareholders are taking environmental risk more seriously. Respondents rank cyber risk joint third (40%). Companies cite viruses (49%), hacking (38%) and data theft by third parties (37%) among their greatest concerns. However, the majority of companies also recognise that the greatest threat often comes from within. 63% of firms believe that employees and internal failures can often pose a bigger threat than cyber criminals. Directors and officers (D&O) liability risk ranks equal third with 40% of companies believing it could present a significant financial threat over the next two years. Export risk (34%), business travel risk (34%) and terrorism and political violence (28%) were ranked as the next most feared emerging risks. Of all these emerging risks, infrastructure and supply chain threats are the most likely to be covered by insurance, the survey finds. 64% of respondents said their company has an insurance policy in place to help mitigate the risk. Next came business travel risk, with cover taken out at 56% of companies, followed by D&O risk (53%), environmental risk (51%), export risk (46%), cyber risk (44%) and terrorism and political violence risk (35%). Writing in the report's executive summary Mr Kendrick said: "The identification and monitoring of emerging risks is far from straightforward. It requires non-traditional approaches and a willingness to listen to dissenting voices that are willing to challenge received wisdom. However, the dynamic nature of today's risk environment means that it should be a growing priority for companies with the right capabilities and processes to monitor their emerging risks, as part of a broader enterprise-wide approach to risk management." "Today's risk challenges demand a cross-disciplinary approach, with the risk function working closely alongside the business to identify, assess and mitigate key exposures. The risk management function plays a vital role in this process," he added. By paying greater attention to this complex and interlinked array of emerging threats and challenges, risk managers can help organisations put their strategic plans on a sustainable footing, he continued. ACE's EMEA Emerging Risk Barometer was based on a survey of 650 executives across a range of industries and 15 countries in the Europe, Middle East and north Africa region. It targeted those with responsibility for risk management, including 159 chief risk officers, 162 chief financial officers and 162 chief operating officers, with the balance made up of other senior managers responsible for risk management and insurance purchasing. Respondents represent both larger companies (above $1bn in annual revenues) and mid-size companies (ranging from $250m to $1bn in annual revenues). It was also informed by interviews with a range of senior corporate risk managers and others professionals with expertise in the field of risk management. The report can be downloaded at: www.acegroup.com/emergingrisks.

EMEA companies struggling to manage emerging exposures finds ACE

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