Marsh webinar highlights “collective failure of imagination”

The Covid-19 pandemic exposed a “collective failure of imagination”, according to James Crask, consulting director and resilience advisory lead at Marsh Risk Consulting.

“I just don’t think business continuity planning was up to scratch,” he says. “The plans weren’t broad enough to capture the widest impacts of the pandemic.”

Speaking at a webinar hosted by Marsh, COVID-19: Financial Institutions — Risks and Controls in the new Working Environment, he and other panelists urged firms to prepare for a sustained shift towards homeworking, a confusing regulatory environment and increased economic uncertainty.

Dr Ariane Chapelle, CEO Chapelle Risk Management Consulting said: “The pandemic itself wasn’t a ‘black swan’. Pandemics had been on the radar for years. The ‘black swan’ was the domino effect that happened across society and the economy.”

And the first step towards planning for our complex new reality is avoiding complacency.

So far, most financial institutions have had “good” crisis and the sector has been relatively unaffected by the wider downturn, according to David Berman, Partner, Latham & Watkins.

But this may not continue and problems in the real economy will inevitably diffuse into the City.

Firms need to prepare for this and convert the short term solutions that they have been put in place into long term planning.

The good news is that adapting well makes great business sense. “Building and maintaining resilience is tough,” says Crask. “It takes sustained effort, it takes practice. But getting it right is hugely rewarding.”

According to Marsh, companies that have got their response to Covid-19 wrong have seen an average 5% fall in their share price – but those who got it right have seen a 12% boost.

Among the many risks exposed by the pandemic was a widespread strategic blindness around supply chains, and many firms found that they knew little about their suppliers beyond tier one and tier two.

Another other major problem remains the sheer complexity of the international response, and the confusing and contradictory policy and information environment companies are now operating in.

Firms also need to find ways to manage what David Berman called “the hindsight risk” and anticipate what future regulators may reasonably expect them to have done in terms of governance.

And given that homeworking is likely to remain the norm for some considerable time, many risk managers may be struggling to find a response to new cyber risks, increased potential for fraud and other issues present in a more informal, atomised corporate culture.

But James Crask is quick to reassure. “You have the tools already,” he says. “Communication is key.”

While the challenges facing the corporate world may suddenly have become more complex, more varied – and our future far more uncertain – the response of risk managers should be driven by the age-old adage: be prepared.

“We need to be ready for everything,” says Dr Chapelle. “And that’s the value of insurance, by the way!”