Risk managers have been urged to address emerging risks head on if they are to effectively combat a range of new threats.
The Institute of Risk Management’s Charities Special Interest Group (SIG) has created a new guide for risk managers within the sector as emerging risk management becomes a priority.
“The general atmosphere of fear and/or mystique around an emerging risk that remains just over the horizon, makes us feel uncomfortable,” stated the guide. “There is often little or no data on which to base the risk response. Emerging risks may appear more challenging to identify, assess and manage.”
However, it added the use of different tools and techniques in addition to traditional methods, will help risk managers work though the challenges.
“It is clear that for an organisation to perform successfully and be resilient, there needs to be an appropriate approach to managing emerging risks,” explained the guide.
“Emerging risks may arise and evolve quickly, unexpectedly, or both. The emerging risk may never happen at all. Emerging risks may have a massive economic loss potential at a macro level for society and subsequently may impact charities directly or indirectly.”
Key said the IRM is to define what constitutes an emerging risk.
It said they can be divided into three categories.
The first is a new risk in a known context: Risks that emerge in the external environment and impact the organisation’s existing activities. For example, you were aware that regulations relating to your activities will change next year.
The second is a known risk in a new context: The management of a risk may need to change if you venture into a new activity. For example, your charity already works with vulnerable adults and decides to start running a crèche for the children of employees and volunteers by the end of their current strategy.
The third is a new risk in a new context: Risks not previously considered because the risk is new to the organisation.
“Emerging risks may be difficult to manage as the assignment of risk ownership can be complex and unclear,” added the guide. “What organisations can do is translate the vagueness of an emerging risk into an organisational risk that they are more familiar with, e.g. regulatory, strategic and operational risks.
“This makes it easier to take action to tackle the risk, as it means that responsibility for the emerging risk can be redistributed to appropriate levels and people within an organisation.”
Alyson Pepperill, CFIRM, Chair of the Institute of Risk Management’s Charities Special Interest Group (SIG) explained: “With the Covid-19 pandemic in full swing, the Charities SIG decided to tackle emerging risk management as our theme. It was quite a difficult one to think practically about but we were able to form a great Working Group that came armed with war stories about what actions had and had not worked for them so it is with great confidence now that we publish the first in a short series of publications on emerging risk management.
“This first publication provides an insight into what can comprise an emerging risk and provides practical techniques you can use to identify the risks that are out there over the horizon.”