Connected threats need risk management shift – Zurich

The past year has been a year of “crystallising political risk”, amid a web of risk connectivity, according to Zurich Insurance.

The growing web of interconnectivity has a “profound effect, which is here to stay”, according to Zurich’s Wendy Liu, speaking at the Brokerslink conference in Marrakech today.

Zurich’s head of global employee benefits solutions navigated the World Economic Forum’s (WEF) Global Risks Report 2017 to give a talk on the “future of risk management”.

“In response, effective risk management therefore requires a holistic approach,” said Liu.

She said 2016-2017 had been a period of crystallising political risk. Geopolitical risk had risen to the fore by 2017, ranked the top threat by the world’s corporate leadership in the WEF report.

“The impact of risks is magnified because they contribute to each other. Together the impact they have on any country or globally is much more than on its own,” said Liu.

The key message, she suggested, is that the negative consequences get magnified by the increased linkage.

The top trends impacting the web of global risk were listed as: the changing climate; ageing population; increasing polarisation of societies; and rising income and wealth disparity.

“Profound social instability” lay at the centre of the web of interconnectivity, she highlighted to attendees at the event in Morocco.

Issues demand collective action globally, such as for climate change, but there is a heightened risk of countries acting unilaterally, particularly if international bodies are reactive and slow to act, Liu explained.

Governments are still the first port of call for society in crisis, she suggested, but the social security safety net is in its worst shape for years, with problems exacerbated by linked trends in employment and migration.

“Turning to the state is not enough…Risk management faces a paradigm shift to address this,” said Liu.

In response, she said “a careful rebalancing of public and private protection” is required, and listed several priorities for corporate leaders, risk managers, insurers and governments to respond to the storm of factors.

The first of these was an effort to shift the responsibility for social protection from government to the individual.

Secondly, she suggested “untethering health and income protection from individual employers or jobs”.

Revamping pension schemes to get in line with modern employment trends and ageing populations was described as another crucial factor.

Implementing policies to increase “flexicurity” was another aspect listed, as well as providing greater support for populations working into old age.