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DAVOS, SwitzerlandGovernments need chief risk officers because they find it so difficult to set priorities without them, Christian Mumenthaler, chief risk officer of Zurich-based reinsurance company Swiss Reinsurance Co., told delegates at the World Economic Forum annual meeting in Davos, Switzerland.
Mr. Mumenthaler used his talk to expand on his concept of the national risk officer that was first mooted by the Global Risk Network of the World Economic Forum when it published its annual "Global Risks" report two weeks ago (www.weforum.org/en/initiatives/globalrisk).
He said that governments currently set priorities and invest resources in risk management activities based on warped public perceptions of risk.
The risk manager used the United States as an example.
Mr. Mumenthaler said that in 2004, the United States suffered 45,000 fatalities from road accidents leading to an economic cost of $230 billion, but only invested $5.3 billion on road and vehicle safety last year.
Hurricane Katrina caused some 1,350 deaths, set against only $4.1 billion federal budget spend or water-related civil works in 2005 and $107 billion federal spending on Katrina relief after the event.
The terror attacks on the United States in September 2001 caused 3,000 death set against the global war on terrorism spend since 2001 of an estimated $430 billion.Mr. Mumenthaler said that the appointment of a national chief risk officer could help redress such apparent imbalances and enable governments to make a more optimal allocation of resources for systemic risk identification, assessment, mitigation and adaptation.
He said that the risk officer would work jointly with the private sector to identify emerging risks; establish the frequency and severity landscape based on latest scientific knowledge; communicate that landscape to policymakers and the general public; steer mitigation efforts towards biggest risks; and manage a pool for "mega" risks, which cannot be carried by the insurance and reinsurance industry alone.
This would help build knowledge about the real risks in both the private and public sector and among politicians and the voting public; enable the adoption of more rational mitigation strategies and use of public funds; reduce human, physical and economic damage; and spur higher economic growth via the removal of uncertainties about the mega risks, such as terrorism, explained Mr. Mumenthaler.