Emerging risks – are you ready for what’s in store?
- Identifying and managing emerging risks is an essential task for any successful organisation
- Risks have become increasingly complex and interconnected, with a number of major global trends influencing the risks faced by organisations
- We look at current global trends, as well as specific emerging risks facing municipal sectors
Emerging risks are an essential consideration for any successful organisation. Anticipating trends not only helps you build resilience against harmful events, but can also put you in the best position to take advantage of valuable opportunities.
We undertake a wide range of activities to help our customers better understand and manage emerging risks. These include our long-standing partnership with the World Economic Forum (WEF), culminating in the production of the annual Global Risks Report, and regular face-to-face customer Risk and Insurance Forums around the country.
Here, we take a look at the results of some of this research, the future risk landscape and what our customers think about it.
Deteriorating risk outlook
At our latest Risk and Insurance Forums, we asked customers whether they thought the global risk outlook had improved since 2013, and the answer was a resounding “no”.
Only one in ten (12%) said the outlook had either improved or stayed the same, whereas more than half (56%) said it had deteriorated and three in ten (31%) felt it had become significantly worse.
This view is supported by recent editions of the Global Risks Report, which have stressed that risks are becoming increasingly complex and interconnected, demanding more long-term thinking and greater cooperation between institutions.
A time of great change
The Global Risks Report 2017 explains how the world is currently undergoing several complex transitions. These include moving to a lower-carbon future, navigating a fourth industrial revolution, and dealing with major shifts in economic and societal demographics.
These global transitions all have a huge influence over the specific risks that individuals, organisations and governments face, making it important to consider them when planning current and future activity.
Included in the Report is a detailed section on the future of our social protection systems. This analyses various emerging challenges – such as the displacement of low-skilled workers by technological advances, an ageing population and the growth of alternative employment structures – and how approaches will need to adapt to surmount them.
Via our Risk and Insurance Forums and conversations with sector experts, we have also identified some key emerging risks facing our customers:
With £10bn in savings still to achieve, local government is likely to explore increasingly unfamiliar ways of working, introducing greater and more varied risks.
Cooperation with other organisations is likely to play a major part in future transformation, with integration of health and social care posing big opportunities. However, challenges around funding, accountability and the integration of different cultures all pose significant risks to successful partnership working. These key topics are discussed in further detail in our Worlds apart: 2016 Senior Risk Manager’s Report, which considers how local authorities are becoming bold commercial entities, driving forward communities and change in radical ways.
As our population continues to grow, we are looking at nearly a million more pupils entering the school system in the UK over the next eight years. In parallel, resources are being squeezed and recruitment remains challenging, making it difficult for education institutions to maintain their desired levels of service. At the same time, students are behaving increasingly like consumers, with a number of ‘failure to educate’ claims recently being brought.
Austerity and government-initiated rent cuts continue to stretch registered providers’ (RPs) finances, while rising demand and right-to-buy schemes increase the need to build more homes. This is moving more RPs to look to modern methods of construction (MMC), which often offer quicker and cheaper ways to build. However, MMC also present a variety of additional risks that RPs will need to manage both during construction and throughout the lifetime of a building.
Charities and social organisations (C&SOs)
Funding cuts are influencing a blurring of the lines between commercial and voluntary sectors, as C&SOs transform their business models to explore new ways of generating income. As C&SOs become increasingly viewed as commercial providers of services, this brings with it added risk – for example, the importance of maintaining a positive reputation and a potential increase in people’s likelihood of bringing a claim.
Meeting the challenge of emerging risks
At our Risk and Insurance Forums, we asked customers how they would rate their organisation’s ability to cope with global risks over the next five years.
Encouragingly, half rated their ability as ‘fair’ while three in 10 said ‘good’. Just two in 10 said either ‘poor’ or ‘very poor’, indicating that most have an overall confidence in their organisation’s management of risk.