Four in five business leaders not confident in ability to manage emerging risk
New approaches needed, says WTW
Only 20% of key business decision makers and their teams think their organisation will be able to respond adequately to emerging risks over the next ten years, and just half say they are confident in their response to today’s risk environment, finds WTW, which urged firms to develop new approaches to manage these risks as the protection gaps widen.
In a new poll crafted by WTW, artificial intelligence was revealed as today’s leading emerging risk, ranked first by 19% of respondents. But AI drops out of the top five emerging risks over the next two-year timeframe, led instead by cyber as the number one threat for 18% of respondents. Looking further ahead, technology was named as the most likely source of emerging risk in ten years’ time, for 23% of respondents.
Lucy Stanbrough, head of emerging risks at WTW Research Network, said: “We need a smarter way to think about emerging risks. Every single risk in our survey was someone’s top risk, which shows there’s a real need for enhanced understanding of a wide range of interconnected risks.”
Publishing its Emerging and Interconnected Risks Survey, WTW says: “We suggest organisations need to rethink their approach to emerging risks, be open-minded, avoid concentrated risks, be sensitive to early warning signs, constantly adapt and always prepare for the worst to ensure they transform their tomorrows.”
WTW says ongoing global turbulence since the pandemic has left too many organisations struggling to find the right approach to prepare for emerging risks, with many vulnerable to potentially damaging scenarios. Stanbrough said organisations buoyed to take action are most likely to put an emerging risk framework in place over the next two years.
“Organisations recognise they are not managing emerging risks as well as they wish they were at the moment, and are focused on changing that,” she said. Stanbrough added that embedding risk frameworks into the business models will make organisations most resilient to “relentless” change.
The survey of more than 330 respondents across different industries and 55 countries covers approaches to today’s risks, future risks and the interconnectivity between those risks.
WTW says the complex landscape for business is not slowing down. “Events once thought rare are becoming more likely, or occurring at scales previously not seen, leading organisations to reassess current approaches to ensure they can navigate today’s operating environment rather than being steered by it,” the report says. “Your vulnerability could be an undiscovered supplier or underappreciated risk connection, as many organisations found with the Russia-Ukraine conflict.”
The poll was undertaken by companies with combined revenues of $2.3trn and is designed to help respondents think about emerging risk using a risk taxonomy of 48 risks across eight categories.
Geopolitical risk was the only category to appear in the top five emerging risks today, in two years’ time and in ten years. It was also one of the leading interconnectivity risks. Technology, while making a strong appearance as an emerging risk, was identified as the greatest driver of change in the next ten years.
Environmental risk dominates the longer-term view over the next decade, and is expected to accelerate. Almost half (47%) of respondents expect climate change and climate transition risks to be a key source of change.
“Organisations expect to see more frequent catastrophic events and are uncertain about what that future might look like,” WTW says.
Adam Garrard, global chairman, risk and broking at WTW, said there is a pressing need for new approaches to emerging risk. “We need more than data-informed decision making to explore the emerging risks shaping risk and opportunity. We need to focus on optimising risk outcomes.”
“Smart specialisation, smart service, smart use of data, smart research. It all comes together to help navigate the complex risk landscape,” he added.
The survey finds that 40% of wider employers say they have not been asked to feed into their organisation’s emerging risks evaluation.
“This suggests there is opportunity to enhance internal intelligence processes through structured approaches. Action is needed to connect institutional pockets of risk intelligence and ensure a coordinated approach across the organization,” WTW says.
WTW’s key findings:
- Concern about organisations’ resilience to emerging risk is high
- There is huge opportunity to harness insights from across the organisation
- Organisations need to move from a siloed approach to risk and consider interconnectivity
- Organisations with a consistent, enterprise-wide approach to emerging risks outperform their peers
- Whatever the risk tolerance, an enterprise-wide approach is needed
- Benchmarking and narratives are more helpful than charts of top risks
- Scenarios and storylines are favoured by many.
