Industry Issues | ERM & Emerging Risks

APCIA ERM Committee: Global Risks

Emerging Risk - Global Risks
(risk assessment: underwriting, reputational, regulatory, operational, legal, financial/solvency)
 

Environmental and Cybersecurity Risks are Top Concerns in World Economic Forum report

The Global Risks Report 2019 from the World Economic Forum (WEF) says geopolitical tensions are creating obstacles to addressing serious risks, such as the long-term risk of environmental degradation and rapidly evolving cyber and technological threats. 

Global risks and cross-cutting challenges - economic, technological, environmental, societal, geopolitical - are intensifying, creating an increasingly complex environment for those in business, government and other sectors around the world. The 14th edition of the Global Risks Report, undertaken in partnership with Marsh & McLennan Companies and Zurich Insurance Group, examines the evolving macro-level risk landscape and highlights major threats that may disrupt the world in 2019 and over the next decade.  

The Global Risks Report is based on the annual Global Risks Perception Survey (GRPS), completed by 1000 members of the World Economic Forum's global multi-stakeholder community. Respondents are drawn from business, academia, civil society and the public. 

The survey asked respondents to consider 30 global risks categorized as societal, technological, economic, environmental or geopolitical, over a 10-year time horizon. 13 global trends were also considered in the survey. The survey also asked respondents to assess the development of key risks over the coming 12 months to gain a perspective on the global risks landscape development for the year ahead.

  • During 2018, macroeconomic risk moved into sharper focus. Financial market volatility increased and the headwinds facing the global economy intensified.
  • Rising geopolitical and geo-economic tensions are the most urgent risks in 2019, with 90% of experts saying they expect further economic confrontation between major powers this year.
  • Environmental risks accounted for three of the top five risks by likelihood and five of the top ten by impact. Extreme weather was the risk of greatest concern in terms of likelihood, but survey respondents are increasingly worried about environmental policy failure. Having fallen in the rankings after the 2016 Paris Agreement, "failure of climate-change mitigation and adaptation" jumped back to number two in terms of impact this year. The accelerating pace of biodiversity loss is a particular concern.
  • Rapidly evolving cyber and technological threats are the most significant potential blind spots. Data fraud and cyberattacks were prominent in the GRPS, which also highlighted a number of other technological vulnerabilities. Two-thirds of respondents expect the risks associated with fake news and identity theft to increase in 2019, while three-fifths said the same about loss of privacy to companies and governments.
  • Declining psychological and emotional well-being highlights the human side of global risks deserving more attention.
  • Global transformations are amplifying risks related to biological pathogens. Emerging technologies are making it increasingly easy for new biological threats to be manufactured and released either deliberately or by accident.
  • Rapidly growing cities and ongoing effects of climate change are making more people vulnerable to rising sea levels. Three main strategies to mitigate this risk include (1) engineering projects to keep water out, (2) nature-based defenses, and (3) people-based strategies such as moving households and businesses or investing to make flood-risk communities more resilient.


Top 10 List of Risk

(Source: World Economic Forum)

RELATED NEWS

Allianz: 2019 Risk Barometer

Top Business Risks for 2019

  • 8th annual survey of top business risks involves participation of 2,415 experts from 86 countries 
  • Business Interruption scenarios are becoming more diverse and complex with rising costs - cyber incidents most feared trigger outpacing fire and Nat Cats
  • Rising cyber threats from nations and affiliated hacker groups. Likelihood of litigation increasing after data breaches
  • Climate change and shortage of skilled workforce are the biggest climbers in rank

https://www.allianz.com/en/press/news/studies/190115_allianz-risk-barometer-2019.html

MunichRe: Summary of Natural Catastrophe Events 2018

Extreme storms, wildfires and droughts cause heavy nat cat losses in 2018

  • Eventful second half of the year contributes to high overall loss figure of US$ 160bn.
  • Half of these losses were insured. Loss burden for insurers substantially higher than the long-term average.
  • Notably, there are clear indications of the influence that man-made climate change has had on devastating wildfires in California, which, like last year, again caused billions in losses in 2018.

National Institute of Building Sciences: Interim Report on the Value of Mitigation

  • NIBS issued the next report in its multi-year study on the benefits of investing in hazard mitigation. The Natural Hazard Mitigation Saves: 2018 Interim Report highlights the significant savings that result from implementing mitigation strategies in terms of safety, and the prevention of property loss and disruption of day-to-day life. The report is a compilation of the project team's results to this point and includes the finding from the 2017 Interim Report, released in January 2018, and a second report, Natural Hazard Mitigation Saves: Utilities and Transportation Infrastructure, released in October 2018.
  • The Institute's project team looked at the benefits of designing buildings to meet the 2018 International Residential Code (IRC) and 2018 International Building Code (IBC)-the model building codes developed by the International Code Council (ICC)-versus the prior generation of codes represented by 1990-era design and National Flood Insurance Program (NFIP) requirements. The project team found a national benefit of $11 for every $1 invested.
  • In the 2017 Interim Report, the Institute's project team looked at the results of 23 years of federally funded mitigation grants provided by the Federal Emergency Management Agency (FEMA), U.S. Economic Development Administration (EDA) and U.S. Department of Housing and Urban Development (HUD) and found mitigation funding can save the nation $6 in future disaster costs, for every $1 spent on hazard mitigation.