Avoid emerging risk blindness with a 12-point checklist

Emerging threats are moving up the risk manager agenda, not least because the 2018 corporate governance code explicitly calls for a robust assessment of such risks.

Despite this, many companies are struggling to identify and manage new or changing risks, choosing instead to focus on the near-term or visible risks. In fact, Airmic found that until a risk appeared on a risk register, many companies tended to ignore it.

To help cope with these nebulous, uncertain and complex issues and ensure that they are firmly on the corporate agenda, Airmic, in association with Marsh & McLennan, has created a new guide to managing emerging risks.

The guide, which was launched in Harrogate yesterday, is designed to give risk managers practical tools to shake up risk assessment and enhance risk management practices.

“The underlying business dynamics of today are so different from those of the past, they trigger the need for recalibrating risk management and rebalancing effort between managing traditional risks and emerging risks,” explains Julia Graham, deputy chief executive and technical director at Airmic.

Included in the report is a checklist for risk managers who want to ensure they’re on the front foot when dealing with emerging threats.

By asking these twelve questions, risk professionals can interrogate an organisation’s approach to dealing with evolving risks and make sure that their company is prepared for the future:

1. Is there a clear definition of emerging risks in your organisation and is this well understood and communicated?

2. Is the assessment of emerging risks part of the overall risk management system for your organisation?

3. Is consideration of emerging risks built sufficiently early and sufficiently well into strategic planning and major investment decisions?

4. Are you comfortable with the oversight arrangements for emerging risks?

5. Is there a consistent risk reporting methodology across your organisation using key metrics that can be aggregated?

6. Is there an arrangement for risk communication and reporting to ensure that your board is sufficiently engaged on emerging risk issues?

7. Is your organisation’s decision-making capacity adequate should there be a significant change in the risk context, internally or externally?

8. Is challenge and debate encouraged with respect to risk-weighted decision-making for strategy, tactics and operations?

9. Is there a process for recording, analysing and discussing incidents and near-miss events to encourage a culture of continuous learning?

10. Is there a preparedness by senior postholders and business partners to admit mistakes, biases and gaps in their knowledge?

11. Is the use of risk-based objectives part of the personal evaluation, development and structured learning of all the workforce?

12. Has the crisis management programme been calibrated to reflect the emerging risk universe and the different characteristics of emerging risks response?

 

Captive insurers – getting INEDS right

Another Airmic report – also launched at this year’s conference – focuses on the importance of independent non-executive directors for the governance of captive insurance boards.

The report, which has been created in association with Aon Captive & Insurance Management suggests five core priorities for captive insurers who want to appoint an iNED to the board.

• Diversity. Build a captive board that achieves a range of appropriate skills and demonstrates substance.

• Onboard. Put time and effort into the induction of new iNEDs and ensure they are well equipped to contribute effectively. Provide them with a contract or service level agreement.

• Educate. Embrace benchmarking and encourage knowledge sharing among your directors.

• Review. Monitor the performance and contribution of your directors and whether they are meeting expectations and providing value.

• Change. Do not be afraid to alter the composition of your captive board if the captive’s profile or needs change.

It also includes five tips for iNEDs that have been appointed to a captive board:

• Contract. Demand a contract or service level agreement that clearly outlines your job, responsibilities, term of appointment, remuneration and D&O insurance coverage.

• Time. Devote adequate time to read board papers, prepare for board meetings and fulfil your responsibilities.

• Research. Build a deep understanding of the captive parent’s business, its operations and risk profile.

• Challenge. Constructively challenge assumed wisdom and the relationship between the captive and its parent.

• Value. Provide independent knowledge and perspective when appropriate to add value to the captive board.