The dynamic risk environment threatens to blindside businesses with new and emerging risks, delegates at the Airmic annual conference in Manchester were warned.
Speaking as the organisation issues a new guide on risk scenarios for its members the CEO, ORIC International which sponsored the report warned that companies had to be alive and aware to the changing nature of today’s and tomorrow’s risks.
“Many boards are blindsided by risk events that come out of the blue. In a world where the pace of change is continuously increasing, anticipating and responding effectively to nonfinancial risks is a growing challenge,” said Caroline Coombe. “The use of scenario analysis helps firms identify blind spots and to better understand and respond to nonfinancial risk,”
The report warned businesses are ditching decades of forecasting habits in view of increased uncertainty and unpredictability globally.
“The world is experiencing a step change as the power of artificial intelligence becomes more visible. Scenario analysis will help organisations to make better informed decisions in support of inevitable changes to their strategy and business models,” says Julia Graham, CEO, Airmic (above pic).
“The guide provides a framework as part of an organisation’s risk management system. It will help risk professionals lead scenario analysis with peers and experts within and outside their organisation to help them understand possible visions of the future that could affect the organisation’s strategy, operations and financial health.
“Scenario analysis can be used to test the strategic and operational plans and activities within the organisation, and how they fit together.”
“One of the critical skills a risk professional typically possesses is the ability to adapt their communication style to their audience. The use of scenario analysis provides an opportunity to engage and interact with people across an organisation in a fresh and dynamic way,” says Karla Gahan, head of resilience, Barnett Waddingham.
Airmic has also been driving the emphasis on scenario analysis and planning in preparing organisations for the climate transition and for increasing geopolitical tensions, such as in the report on Navigating geopolitical risk, launched in collaboration with the Chartered Institute of Internal Auditors earlier in February on the anniversary of Russia’s invasion of Ukraine.
Graham also announced that the organisation will; spend next year examining the challenges around the relevance of the insurance sector in the future working environment.
“All too often are reports will look at risks but this year we will be production a report of the relevance of the insurance industry,” he revealed. “It will examine the insurance industry, where it is heading and its continued relevance,”