A View From Me on ’23 – Resilience will deliver new opportunities in the face of risk

Alistair Fraser, CEO – Commercial & Corporate UK at Marsh, says 2023 looks likely to deliver a kaleidoscope of risks but they come with opportunities for those firms that focus on resilience.

As 2022 draws to a close, it presents a chance to reflect on the changes that have taken place over the last 12 months, many of which have tested our resilience as individuals, organisations and communities, but which have also presented opportunities for practising vigilance and proactively managing risk to gain a competitive advantage.

Having slowly emerged from the trials of COVID-19 and now navigating the consequences of the ongoing war in Ukraine, particularly the resulting trade tensions, businesses now face greater uncertainties around affordability and inflation. This is echoed in Marsh’s UK Business Risk Report published earlier this year, which listed financial uncertainty as one of the top three risks facing the UK’s small and medium-sized businesses in particular.

In a largely interdependent global economy, UK businesses, especially those with exposures in different geographies, are being required to re-examine their operations, including carefully reviewing their supply chains and labour costs, to manage losses and minimise the risk of underinsurance.

UK businesses are not alone in facing these challenges. According to the most recent Executive Opinion Survey from the World Economic Forum, which garnered responses from more than 12,500 executives across 122 economies, there exists a clear unease about economic headwinds against a backdrop of aggravated geopolitical tensions.

Environmental, social and governance (ESG) considerations are also at the forefront of boardroom discussions and have evolved rapidly this year, with an even greater focus on transparency, accountability and reporting. New requirements, such as those under Taskforce for Climate-related Financial Disclosures (TCFD), have resulted in closer scrutiny from an expanding stakeholder universe, including insurers.

As we go into 2023, organisations must pay even closer attention to their contribution to tackling global sustainability and ESG-related challenges. Marsh’s ESG Risk Rating, an assessment tool that can measure an organisation’s ESG performance, enables organisations to identify their most critical sustainability and climate-related risks and opportunities to further develop their ESG strategies.

As part of ESG measures, UK businesses should be proactively accelerating their efforts to improve diversity, equality and inclusion amongst their workforces to more closely mirror the world that they operate in. This includes pushing meaningful social mobility initiatives, encouraging greater diversity in leadership positions and attracting more neurodiverse individuals to their respective industries.

Social discrepancies are not conducive to resilience in the face of future adversity and shocks. More diverse workforces mean more innovation, better problem-solving and an enhanced capacity for generating new ideas.

The effects of the current cost of living crisis, exacerbated by the broader economic environment, is another people-related risk which organisations should be factoring into their risk registers. While businesses seek to reduce costs, a careful balancing act will be necessary to ensure that employee mental health and well-being support continues to be provided. This is as important now as it will be next year.

With ongoing technological innovation, businesses will also need to stay abreast of their cyber-related exposures in 2023. The threat of cyber crime, particularly ransomware, shows no sign of abating. While the insurance and risk management industry stays alerts and acts swiftly when it comes to evolving cyber risks, issues surrounding systemic risks and catastrophe scenarios will remain a concern for the foreseeable future. Improved cyber hygiene controls, particularly in digital supply chains, should be a core imperative going forward.

While UK businesses come to terms with how to deal with existing and evolving risks, they will also be required to navigate a kaleidoscope of new risks throughout 2023 in order to maintain a competitive advantage over their peers. Immediate and urgent economic and geopolitical risks are rightly being focused on by business leaders. However, if other major longer-term risks are overlooked, this could create future blind spots, leaving UK organisations exposed to severe threats that could seriously impact their long-term success during these already-uncertain times.

With risk comes opportunity. It is therefore incumbent upon businesses of all sizes address to their vulnerabilities with a resilience-first attitude and view them as areas for positive change and growth. This approach will enable them to withstand any unexpected future shocks and look to the future with added confidence.