The world has never seen so much conflict. In March this year the president of the International Committee of the Red Cross (ICRC) Mirjana Spoljaric Egger said the organisation had identified more than 130 armed conflicts worldwide. This is twice as many as 15 years ago and almost four times as many as 30 years ago.

The headlines have been dominated by the conflict in the Middle East and the ongoing war in Ukraine following the Russian invasion five years ago. The ongoing blockage of the Strait of Hormuz and the attacks in the Red Sea have closed two of the world’s most vital waterways and the economic and business impacts are only increasing.

It leaves many businesses and their insurers scrambling to identify and understand both the risks and the implications for their future success in the short medium and long term.

The issue remains the volatility and uncertainty of the geopolitical risks the world is currently facing, and it is testing the risk assumptions for underwriters and risk managers across the world.

However, given that armed conflict is now at the heart of so many of the major risks are their lessons that can be learned from armed forces and military strategists?

Lee Williams, Head of AdvantageGo, a Sapiens company.

General Sir Richard Shirreff former deputy supreme commander Europe for NATO and co-founder and managing partner of Strategia Worldwide, says that there is much that corporate risk managers and risk professionals could learn from the military at a time of unprecedented and fast moving global risks.

The military would not look to mount any operation without that operation having been war gamed,” he explains. “It was always the conclusion of the process before the decision was to be made as to whether the operation would take place.

“It is designed to stress test your plans and identify the risks. You would have a blue team which were the friendlies and then you would create a red team which was the enemy. The red team’s aim was quite simply to look at how they could thwart your plans and identify the best way to do it. The process would be independently umpired. The blue team would cite its intention, and the red team would say ‘if you are to do that we will counter you by doing this’. The umpire would then subjectively decide the outcomes and if the blue team lost they would need to reassess what they would do differently to change the outcome.”

Shirreff adds: “No one can foretell the future. You might have what you think is the best risk management strategy, have a spreadsheet that filled the green amber and red, but wargaming allows you to think laterally and your red team should be those in the organisation who can think both laterally, outrageously and find the gaps in the you strategy you have missed.

“Scenario testing is all well and good in an organisation, but you are confirming your own bias. You need those from outside of the risk process to challenge your thinking.

“The beauty is that it does not matter if you get it wrong. If you get it wrong then you have the opportunity to rethink it and make changes before the real crisis occurs.”

He says it is becoming increasingly apparent that the conflict in the Middle East will last for some considerable time and as such businesses and insurers needed to understand the risks and create fully tested crisis strategies.

“The Strait of Hormuz is likely to be shut for years,” Shirreff explains. “Iran knows it has a major card, and it will not open the strait unless it gets something in return. Israel and the USA  cannot be seen to give Iran anything, but Iran will want to get something before the Strait is reopened.

“The only way it will reopen is by an agreement being reached but there is absolutely no indication that there is any hope of an agreement. It will be a long term issue and businesses will face new risks as it continues.”

“Yes, wargaming can go wrong, it is not perfect,” he says. “However, it enables you to identify the unknown unknowns.”

Shirreff adds that the use and benefits of wargaming will only happen when there is change in corporate culture and it will need to come from the top.

“Too many CEOs do not want to be tested. They know it all.

“We recently were contacted by a new CEO at a company who wanted his risk management systems tested and asked us to create a red team to do just that.

“When you look at who should be in your red team they need to be extremely free thinking, lateral thinking and happy to look outside of the boundaries. They can be staff who know something about the business and can identify the issues, or you can bring in experts form outside.

“Your red team will create ideas and thoughts you had not considered , but to be successful it needs to be collaborative.”

Shirreff adds: “You need to find ways to navigate the uncertainty we now see in the world, the supply chain and the economy. Businesses need to access intelligence and that out of the box thinking.

“You need crisis management policies in place, tested and easily understood. That crisis response needs to have been practiced.

“I come from a world where you train, train, and train. If you do not you will be caught out.

“Practice the response to the crisis. When the real crisis occurs, it might not be that exact crisis but if you have practiced then you are in a better place.”

Shirreff continues: “In our experience the last people who want to be challenged are the CRO and the risk committee. They need outside challenges. The need poachers not gamekeepers.”

He concludes: “A lot of companies will crisis manage but very few will wargame. It is far more than simply the icing on the cake. It is far more important. It is a strategic approach while crisis management is tactical.”