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Companies wise to cultivate ‘risk champions’

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risk management

COVID-19 has highlighted the increased need for businesses and government to find ways to mitigate risk, whether by strengthening supply chains or fostering “risk champions,”  industry experts say.

Multiple reports point to infectious disease or pandemics being a critical concern among executives, and greater focus on risk management is needed if organizations are to be ready for the next unknown global outbreak, they say.

With the world more attuned to risk, there is “an opportunity to leverage attention and find more effective ways to identify and communicate risk to decision-makers,” according to the World Economic Forum’s Global Risks Report 2021, published Jan. 19.

Lessons from COVID-19 offer an opportunity for mitigation, including positioning “risk champions” before the “frenzy of the next crisis,” the report said.

Investing in high-profile risk officers can bring together different stakeholders to spur innovation in risk analysis, financing and response, and improve relationships between scientific experts and political leaders, the report said.

Risk champion roles should exist in every company, said Colleen Zitt, chief risk officer for Zurich North America in an interview with Business Insurance. It takes “leaders of risk to think ahead,” Ms. Zitt said.

Even with risk champions in place, “the importance of leadership attention to risk at the highest levels in business and government is by no means lessened,” the WEF report said.

Formulating analytical frameworks that take a holistic view of risk impacts will help strengthen the resilience of countries, businesses and the international community to future events, the report said.

As much as risk managers focus on program structure and how the markets are hardening, it’s important to think about how risk can cascade across the organization, Reid Sawyer, Chicago-based head of the Emerging Risks Group of Marsh Advisory, a unit of Marsh LLC, said in an interview with Business Insurance.

The organizations that have weathered the pandemic best were those that had “the highest degree of anticipation and were planning for these types of events, not only in the way they were structuring programs but more importantly putting mechanisms of resiliency in place ahead of time,” Mr. Sawyer said.

It’s critical to have resiliency mechanisms in place that allow the organization to respond to the greatest number of potential shock events, he said.

COVID-19 is a reminder that not all perils are insurable, and that risk management and business continuity planning play a critical role in helping businesses survive extreme events, according to the Allianz Risk Barometer 2021, also released Jan.  19. The report was based on a survey of 2,769 experts, including Allianz customers, brokers, industry trade organizations and staff, from 92 countries and territories, conducted in October and November 2020.

Business interruption was the top-ranked global peril, followed by pandemic outbreak, which climbed 15 positions from the previous year to second place, while cyber incidents ranked a close third, Munich-based Allianz Global Corporate & Specialty SE said in the report.

The pandemic has shown that business interruption is highly correlated with many of the risks of most concern to organizations such as natural catastrophes, climate change, market changes and cyber, the report found.

“We talk about non-physical damage business interruption happening with cyber and power outages, and now the pandemic is part of that,” said Thomas Varney, Chicago-based regional manager of risk consulting, North America, at Allianz Global Corporate & Specialty SE.

Given the interconnected landscape, business continuity planning needs to become more holistic and dynamic, with companies taking an approach that develops alternative or multiple suppliers and invests in digital supply chains, Mr. Varney said.

For example, the move toward greater digitalization has accelerated with COVID-19 as reflected in the rise in remote working, Mr. Varney said. How to keep data secure when people are working outside their office environments and as cyberattacks increase is something that needs to be thought about, he said.

How businesses and societies use data insights is going to be key going forward, Ms. Zitt said.

“Data can become something for us as a solution and asset, but we need to make sure we have balance in how data and the insights are used for societal good and for the directional good of risk management,” she said.

More insurance and risk management news on the coronavirus crisis here.