Risk managers say forecasting risks will become more difficult

Most risk managers believe forecasting risk will become more difficult in the next three years, but cyber-attacks and regulation are the areas from which emerging risks will most likely arise, according to a new report by Marsh and RIMS.

Based on more than 700 responses to an online survey, the report found that 48% of risk managers think forecasting critical business risks will be more difficult three years from now, while 26% believe it will be the same.

For 61% of risk managers, cyber-attacks are the likely source of their company’s next critical risk. This is followed by regulation and talent availability, cited by respectively 58% and 40% of respondents.

“Whether emerging risks are on your doorstep, around the corner, or on the far horizon, they have the potential to catch organisations unaware,” said Brian Elowe, Marsh’s US client executive leader and co-author of the report. “It’s important for risk professionals to maintain awareness of global risk trends, and to make the connection to their organisations’ business strategy.”

The survey found 60% of risk managers use claims-based reviews as one of the primary means to assess emerging risks, compared to 38% who use predictive analytics.

“The widespread use of claims-based reviews means that a majority of organisations are relying on studying past incidents to predict how emerging risks will behave rather than using predictive analytic techniques like stochastic modeling and game theory to help inform their decision making,” Elowe said.