BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
LONDON—Risk managers must ensure they foster an environment that facilitates discussion about the biggest risks facing companies and societies, experts said during the launch of the World Economic Forum's seventh global risks report.
The “Global Risks 2012” report found that chronic fiscal imbalances as well as risks connected with regulation and cyber risks are the biggest challenges facing governments and companies.
Risk managers have a role to play in ensuring their companies discuss current and future risks, while the insurance and reinsurance industry should take advantage of the opportunities these risks present by providing products and risk mitigation solutions, experts say.
The report, which was based on findings gathered from 469 risk experts and industry leaders, found that the expanding gap between rich and poor—and the strain being placed on retirement plans by an aging population—is one of the major risks that societies and companies now face.
The risks associated with lax, inappropriate or overzealous regulation also figured strongly in the minds of contributors to the report.
And the risks associated with increased online connectivity and cyber crime also are major concerns for companies and governments.
The report cited 50 areas of risk, but it also identified other risk areas, which it called “X factors,” that have the potential to grow in importance but currently have unknown consequences.
“Without a doubt, the most important thing risk managers can do is try to create an environment that fosters transparency and trust” within their organizations so there is an awareness of potential risks, said David Cole, chief risk officer at Zurich-based Swiss Re Ltd.
He added that while it would not be desirable for all risks to be eliminated—because with risk also comes opportunity—there needs to be an awareness of risks within companies so they can be mitigated.
“One of the important lessons we have learned is that you cannot always be looking in the rearview mirror,” Mr. Cole said.
Risk managers must be aware of some of the “X factor” risks, which include constant connectivity; epigenetics, or the effect of heredity and habit on individuals' genetic code; financial illiteracy; mega-accidents; poor education; misinformation; neotribalism, or the idea that humans have evolved into a tribal society rather than a mass society; resource wars; and volcanic winter, he said.
Those risks may well develop into major risks in the coming years, so discussion about their impact and management must begin now, he said.
“The key role for the insurance industry is to work with clients to identify the risks inherent in their business and to accept a certain level of risk,” Mr. Cole added.
The concept of taking a holistic view of risk is a difficult one, “but it needs to be done,” said Steve Wilson, Zurich-based chief risk officer for general insurance at Zurich Financial Services Ltd.
For example, he said, many supply chain disruptions are caused not by an immediate supplier of a company but by a supplier further down the chain. Risk managers need to “look beyond their immediate business connections and be aware of the interconnectivity of risks,” he said.
For its part, the insurance industry must try to ensure that the products it offers are relevant and match the risks faced by clients, Mr. Wilson said.
There must be transparency, and buyers must have an idea of what it is they need to insure to ensure that they have the best possible coverage, he said.
Risks highlighted by the WEF report present opportunities to the insurance industry, said John Drzik, CEO of Oliver Wyman Group, a unit of Marsh & McLennan Cos. Inc.
For example, the shift of certain risks associated with longevity from the public to the private sector provides the industry with opportunities to devise products, he said. The growing shift from defined benefit to defined contribution plans places more responsibility on individuals to ensure that they have saved enough for their retirement, and the insurance industry has a role to play in providing products that give security to consumers.
“It requires product innovation,” he said.