Marsh McLennan says UK resilience review should increase role for risk managers

Public-private partnerships are “back on the table” in the UK after a string of recent crises have created a “pivotal moment” for change, with risk managers well placed to step up and help deliver on the goals of the country’s ongoing resilience review, Richard Smith-Bingham, executive director of Marsh McLennan Advantage, told Commercial Risk Europe. Now is the time to look at where the UK has fallen short and pursue opportunities to increase its resilience to future extreme events, said Smith-Bingham, author of a recent Marsh McLennan report that feeds into the UK government’s national resilience review. He said the risk manager’s primary function is to anticipate challenges that their own organisation might face but believes they have a wider role to play. “This report really asks firms, risk managers and chief risk officers to think about where their firm fits in a bigger national resilience ecosystem,” Smith-Bingham added. He added that all of the “opportunities” identified in his company’s report would help strengthen national resilience capabilities. “I’m hoping the new national resilience strategy will recognise that some of the old assumptions about the strength of our existing resilience mechanisms don’t pass muster. It would be great if the government was prepared to be bold on knotty issues such as regulation and data, and to innovate and try things out,” he said. “This report puts out new ideas – it looks to future risk challenges and recognises the enormous untapped potential of government working more effectively with the private sector,” Smith-Bingham said. The UK government’s national resilience review asks fundamental and challenging questions that “signal openness to significant change”, he added. As the continued impact of Covid-19 collides with a supply chain crisis and growing concern over climate change and cyberattacks, the UK remains vulnerable to emerging risks and shocks on the horizon, Smith-Bingham noted. This is an opportunity for the private sector, which has been alive to extreme and systemic risks for some time, to increase its wider role in resilience and crisis response, he added. “We need to explore and nail down the right structures and interactions between government and the private sector to consolidate that momentum and achieve real goals,” Smith-Bingham said. “The gap between assumptions and reality, and plans and execution, has often been quite wide.” Greater collaboration between the private sector and government sits behind the 18 ideas, or opportunities, discussed in Marsh McLennan’s report for the National Preparedness Commission that is running the resilience review. “We need to refresh how we apportion responsibility for risks, how we regulate for resilience and how we share data,” Smith-Bingham said. He added that the government could regulate for greater resilience, especially for systemically important sectors. It also could mandate stockpiles for critical goods more effectively and require tighter cybersecurity to mitigate growing threats. The Marsh McLennan report drafts the development of a cyber risk pool, given concerns that a large-scale attack could overwhelm current resilience levels. Organisations can already do more to improve cybersecurity and cyber contingency plans, but this sits within the wider picture of national cyber resilience and effective risk mitigation, said Smith-Bingham. He said a cyber risk levy-and-pool system, modelled on existing government-backed reinsurance schemes, could focus on solutions for an infrastructure-based cyberattack in the UK, as well as affordability of insurance for SMEs. Such a scheme could help lift cyber resilience baseline levels at firms through incentivising standardised mitigation efforts, he said. Separately, new legislation could grant government additional powers to prescribe cybersecurity measures for critical national infrastructure, to intervene and assist in a crisis, and require due diligence assessments on cyber resilience of critical national infrastructure supply chains, the Marsh McLennan report says. It also resurrects debate about a multi-peril insurance scheme for catastrophes, which Smith-Bingham said has gone quiet recently. Given the complexity of such schemes, it is understandable that progress has stalled, but Smith-Bingham said discussions should be reawakened in the context of the government’s resilience review. A multi-peril scheme with parametric components would diversify risk for insurers and provide fresh opportunity for insurance buyers against events that might present existential threats to their business, Smith-Bingham said. “This scheme could help spur greater resilience overall, if it incorporated incentives towards risk mitigation measures by companies. Ultimately, the government might end up paying less of the bill in a crisis,” he said.

Marsh McLennan says UK resilience review should increase role for risk managers

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