CHICAGO--Signs of emerging risks typically exist well before losses occur, according to several enterprise risk management experts. The trick is to recognize those signs.

Speaking at the recent 2009 Enterprise Risk Management Symposium in Chicago, panelists at two sessions addressed emerging risks and structures to identify them.

"Enterprise risk is very complex...and things don't happen the same way twice, not quite," said Neil Cantle, a principal and consulting actuary at Milliman Inc. in London, who spoke during the April 29-May 1 symposium.

Complex risks actually behave more like processes or systems, Mr. Cantle said.

"Often we see crises and we look for the symptoms," said Neil Allan, senior lecturer on strategy in the School of Management of the University of Bath in England, who also spoke at the symposium. "What we're saying is you can go a level below this."

The signs of a strategic risk nearly always exist before an event occurs, Mr. Allan said. Failure to see or understand those signs prevents recognition of the risk before an event.

"One of the definitions of a complex system is you can't understand what's coming out of it by looking at what the inputs are," Mr. Allan said, because interactions within the system shape those outputs. Among examples of complex adaptive systems he offered were the weather, bird flocking and fish shoaling.

"Enterprise risk management for me is a form of a complex system," Mr. Allan said.

"Complex systems are a good framework for thinking about companies," said Mr. Cantle. "There's lots of things that can go just very, very slightly wrong."

"Understanding how the system works is the absolutely critical part," he said.

Speaking on another panel, Max J. Rudolph, founder and actuary at Rudolph Financial Consulting L.L.C. in Omaha, Neb., said "continuous environmental scanning" is necessary to identify emerging risks.

As enterprise risk managers, it's also necessary to avoid attributing unanticipated losses to "a perfect storm" or other reasons instead of admitting mistakes, he said. "That's the way we evolve our models, by being open about our models," Mr. Rudolph said.

Beverly Barney, vp and actuary at the Prudential Insurance Co. of America in Newark, N.J., described her company's efforts to establish a mechanism to identify emerging risks. Prudential considers "emerging risks" as risks with a possibility of loss with increasing probability with no precedent, she said.

In trying to establish a process to identify emerging risks, Prudential looked across the entire company, because previous risk assessment efforts had been confined to business "silos," Ms. Barney said.

The company started with hourlong brainstorming sessions among senior executives monthly for four months. Those sessions now take place on a quarterly basis. Similar brainstorming exercises also involved "folks closer to the work," Ms. Barney said.

In addition to the brainstorming sessions, various presentations raised awareness of emerging risks. And the insurer created an advisory group of representatives from different areas of the company to help answer questions about emerging risks or implement suggestions to address them.

Beyond its internal efforts, Prudential also met with outside consultants, scanned relevant news and information sources, joined the International Network of Actuarial Risk Managers' subgroup on emerging risks, and studied relevant survey findings and newsletters.

According to Ms. Barney, a successful mechanism to identify emerging risks includes a system to identify and monitor leading indicators, a process to quickly collect information across the company, a process to identify secondary risks, a management group to manage through an event, an exploration of alternative mitigation techniques, definitions for the format and content of reporting, and reviews of actions taken.

"What is interesting is some of these are now in place after coming through the financial crisis," Ms. Barney said. "But we still have more to do."

Prudential has focused largely on working through its existing risk management structure.

The brainstorming and advisory groups continue to meet regularly, discussions of emerging risks have broadened across the company, and the topic of emerging issues is a standing agenda item at regular meetings of the company's risk officers.