At a glance
- The 2016 Global Risk Report highlights climate change, mass migration and sudden jolts in energy price as the greatest risks companies face
- An 'asset bubble' is the top risk concern for UK businesses
- We outline 4 key strategies UK businesses can implement to cope with diverse risks such as these
The World Economic Forum’s 2016 Global Risks Report highlights how public and private sector organisations now face an increasingly diverse network of risks.
Organisations that are able to respond most successfully to threats, such as floods, cyber attacks or a global economic crash, often share a common feature – an understanding of the importance of building resilience within their structure.
The report cites risks as diverse as climate change, mass migration and sudden jolts in energy prices among the greatest global risks that organisations face today.
UK respondents to the report highlight an “asset bubble” as their number one concern. This happens when a sudden spike in the value of an asset, such as property, or oil, is followed by a dramatic fall, or ‘bursting’ of the bubble.
How global risks can affect UK organisations
The 2016 Global Risks Report
Zurich was a strategic partner in the 2016 Global Risks Report, which gauged the opinions of nearly 750 experts and decision makers from the public and private sectors. Respondents were asked to give a rating for the impact and likelihood of 29 global risks.
The volatility of the global steel market led to the recent closure of several UK steelworks, with the loss of thousands of jobs. This serves as a reminder of how global risks, such as an asset bubble, can filter through to a local level.
The closures, which were in part blamed on a sharp drop in global steel prices, affected many businesses that formed part of the steelworks’ supply chains. They also put local authorities under pressure to provide employment support services to those who found themselves suddenly out of work.
While organisations may be used to developing strategies to deal with risks that could directly affect their own employees and assets, building resilience is the most effective way of preparing for unexpected risks over which they have less control.
4 key elements to organisational resilience
The Global Agenda Council (GAC) on Risk and Resilience outlines four strategies organisations should implement to build resilience:
1. Clarify roles and responsibilities
During a crisis, any confusion regarding who is in charge or who has the authority to deal with a given situation can waste crucial time and resources. This is why it is important that roles are clearly defined and crisis management plans fully understood.
2. Develop crisis leadership characteristics
While responsibility for dealing with certain risks may be safely delegated, it is vital that senior management takes responsibility for bigger, strategic risks.
3. Leverage expertise
In terms of leveraging expertise, the GAC says organisations should set up “expert networks in advance, across multiple sectoral, professional and disciplinary boundaries”, to ensure they have access to specialised expertise in the event of a crisis.
Lessons can also be learned from the experiences of others in managing a crisis. For example, how a comparable organisation has responded to a major flood, or handled a cyber attack.
4. Create a culture of integrated risk management
Integrated risk management is about everybody within an organisation – including its supply chain – understanding the importance of identifying and sharing information about risks, so there is no danger of ‘risk-blindness’, where important details about potential threats fail to reach board level.
How building resilience can create opportunities
Building resilience should not simply be seen as a mechanism to fend off threats.
The Cranfield School of Management’s Roads to Resilience report observes that organisations that are “confident in their risk management, have the confidence to be more enterprising and entrepreneurial, thereby not only identifying risks but also seizing opportunities.”
It continues: “Resilience should be at the heart of strategy and part of the overall vision of every organisation.”
How Zurich can help
Brokers can access Zurich’s risk management expertise to support their customers in implementing strategies for building resilience and help mitigate risks they cannot control.
For more information on strategic and operational risk engineering, please speak to your usual Zurich contact.