Risk managers urged to play key role in fractured world

Risk managers have an important role to play in supporting organisations through today’s turbulent and changing geopolitical and trade environment, according to experts participating in an event hosted by Ferma and the European Confederation of Institutes of Internal Auditing (ECIIA).

Speakers at the online event, which considered the findings of the recent WEF Global Risks Report, alongside similar Ferma and ECIIA member surveys, urged risk managers to make greater use of data, artificial intelligence and scenario planning, as well as alternative risk transfer solutions like captives.

According to Lorraine Stack, Marsh’s managing director and risk management leader for Europe, the WEF report shows a world divided, and dominated by state-based armed conflict, geo-economic confrontation and extreme weather events.

“Ultimately, last year’s report asked the question: Are we close to the tipping point? This year’s report is telling us we have passed the point of no return, particularly with environmental risks, which have become an urgent reality,” said Stack.

“So how do we collaborate as risk management? In terms of sharing challenges in a fractured world. It is not easy,” she said, speaking at the event.

Risk managers have a big role to play in supporting organisations in these turbulent times, according to Laurence Eeckman, vice president for group risk management at Swedish manufacturer Atlas Copco and Ferma board member. She believes risk managers need to collaborate internally to gather information to better understand risk, and embrace tools like foresight and scenario analysis. According to the recent Ferma survey, 88% of risk managers still use spreadsheets.

“We need to be more agile and use technology,” said Eeckman on the webinar event.

Stack also believes that risk managers, and the wider risk management community, has plenty to offer. “We have expertise, we know about modelling and we know about risk. So we can certainly help our organisations with these risks. Essentially we need to use future scenario testing, and we need to stress test investments and growth strategies,” she said.

Leveraging AI will be important in assessing supply chain risks, according to Stack. “Understanding your supply chain and potentially moving and changing supply chains, given the world and trading environments are changing, will definitely be key. So using AI to get line of sight into those supply chains will be really important. Lots of companies have really good line of sight into tier one supply chains but that visibility deteriorates when you talk about tier two and tier three,” she said.

The immediate and long-term risk outlook is gloomy, according to Stack. The majority (88%) of respondents to the WEF survey, which was conducted before the US elections in November, say the outlook for the next two years is unsettled, turbulent or stormy, rising to 92% for the 10-year horizon.

“The fact that the perception over the 10-year horizon is even worse than the short-term  horizon suggests that respondents are not confident in the structures that we have in place to meet the demands over time,” said Stack.

The highest perceived risk this year in the WEF survey is state-based conflict. “There are a record number of conflicts happening around the world; the highest since the end of the cold war. And with these comes related humanitarian emergencies. What we are seeing, is all those multilateral organisations that were established after World War II to encourage peace and trade around the world are really weak…Ultimately what we are seeing is an alarming lack of appetite for multilateralism,” said Stack.

The shifting geopolitical climate has implications for trade and supply chains, she continued. “Military spending is increasing dramatically while humanitarian funding is declining. There is a growth in unilateralism, and for our clients and companies, this is creating shifts around supply chains and trade flows. Rising protectionism and increased trade disputes have led to a significant increase in tariffs and trade barriers worldwide,” she said.

The trading environment is becoming more complex and uncertain, which is why geo-economic confrontation was ranked as the third biggest risk in 2025, the fastest moving risk in this year’s WEF survey, said Stack.

A separate WEF survey of economists predicted that US policies will have a long term impact on global trade, although the impact of Trump’s tariffs is likely to be less than his “bombastic promises,” said Stack.

“Geopolitical tensions are still a drag on trade but they are likely to be offset by growing trade between countries that are more geopolitically aligned. So we are seeing realignment. Trade routes and trade partners will change over time,” she said.

When looking at the two-year horizon, respondents to the WEF survey ranked misinformation and disinformation as the top risk. With a new administration under President Trump, the US is putting pressure on Europe to relax its regulations on technology, especially AI.

“Now we are seeing fact checkers removed in the US and a move to technological deregulation in the US; Big Tech is pitching for a roll-back on regulations, specifically around generative AI, where they felt the previous US administration was cracking down on AI and stifling innovation. The US is looking to the EU and telling us you need to do something on regulation also – not just regulation around tech but on a number of issues. They are keen to have us reconsider our regulatory environment for AI here in Europe,” said Stack.

Looking to the next 10-years, the top five risks in the WEF survey are dominated by environmental threats. To make matters worse,  the latest Ferma member survey found that 73% of risk managers expect climate-related risks to become uninsurable in the future.

“That is a scary thought, but something we need to prepare for. What we are learning is that insurance is not necessarily going to be the answer for everything. It is going to be part of the solution, but not the answer. In fact insurance may be a short-term solution to buy us time to build resilience for the longer term. Emerging technology offers hope, but the effects of climate change are already here and adaptation and mitigation are key. So we need to build resilience,” said Stack.

She expects alternative solutions, including captives, to play a greater role going forward. More than half of the respondents to Ferma’s latest member survey say they expect to make greater use of captives going forward.

“Insurance alone is not sufficient. The broader ecosystem, economic and alternative risk solutions need to be considered too. Things like captives…we expect to see captives used more as companies are expected to retain more risk. Also public-private partnerships, like community-based catastrophe bonds, and building back more resilient buildings. Everything points to us creating more resilient infrastructure,” said Stack.