Airmic’s annual survey points to a more qualified profession with greater ambitions to support strategic decision-making. But how can they realise this ambition? StrategicRISK takes a closer look at the story behind the statistics
Almost 100% of risk managers hold at least one professional qualification – according to Airmic’s annual survey.
The main report, Risk management: vision 2020 – which was launched in Harrogate yesterday and supported by five deep-dive research reports examining specific data sets from the survey (see boxouts) – shows how the nature of risk management is evolving to meet more complex risks.
While gaining professional skills is nothing new for risk managers, the trend towards risk managers holding accountancy, legal or business continuity qualifications indicates a shift towards helping companies at a more strategic level, explains Richard Cutcher, research and development manager at Airmic.
When risk managers were asked what opportunities they would most like made available to them, the most popular answer was a greater ability “to influence strategic decision making.”
A staggering 82% of directors or department heads and 76% of managers identified this strategic growth as the most important priority. The second most popular option was a “more interesting range of challenges (such as managing emerging risks)” and the third was a “broader range of responsibilities”.
“Risk management is maturing to address risks within and beyond an organisation’s direct control, which requires our visibility and contribution across the business and at board level,” says Lynda Lucas, director international risk management at Fujitsu.
To exert this influence, risk managers said they want more collaboration throughout an organisation. The survey showed that risk professionals already have a degree of visibility across business functions – 85% said they already work with finance departments, for example, but they want to get closer to the business continuity, crisis management and information technology security departments.
The changing nature of risk
One of the key drivers behind risk managers’ desire to be involved at a more strategic board level is the changing nature of the risks that corporates face.
The survey supported recent research from Standard & Poor’s that 90% of assets are intangible. It is therefore unsurprising that the major risks facing organisations have also become increasingly intangible.
For the third consecutive year, risk managers identified loss of reputation as the number one risk facing their businesses today. A whopping 79% of risk managers said that this was their leading source of concern.
John Ludlow, chief executive of Airmic, says: “Reputation and corporate brand are the company’s most valuable assets. In today’s connected society, trust is a prerequisite of support from an increasing range of empowered stakeholders.”
The next most important risk was business interruption following a cyber event (56%). Here risk professionals and the c-suite appear to be in sync. Data security was identified as the top concern within the boardroom.
Digital disruption is another issue keeping managers up at night, with 77% of those surveyed saying that this risk has become harder to manage in the last twelve months and 63% saying it will get harder yet in the next few years.
“Organisations have the ability to be severely impacted by a cyber-type event, and many to a severe level,” said Tracey Skinner, group insurance director at BT Group.
The third biggest threat identified by risk managers was political uncertainty (49%). Continued uncertainty over Brexit, a volatile trade war between the US and China and heightened tensions in the Middle East are just some of the issues keeping geopolitical risks top of mind for managers.
The research indicated that this is one of the areas that risk professionals are finding the most challenging to deal with. Some 75% said that political risks have become harder to manage over the past 12 months and 83% said they will pose even more difficulty over the next three years.
Another top risk identified by managers was climate change and environmental disruption, something which respondents said was only going to get harder to manage in the near future.
This is hardly surprising. As consumer awareness around environmental issues has heightened, the reputational cost for companies that fail to act can be severe.
In fact, these reputational issues can also translate into significant material losses. The London protests by environmental group ‘Extinction Rebellion’ in April 2019 are said to have cost UK firms at least £12m after just two days due to a decline in footfall and disruption to supply chains.
Despite this pressure, the importance of managing climate risk does not appear to have made an impact on the c-suites of organisations. Only 9% of respondents identified climate change as the top concern within the boardroom.
Transferring out risks
The final area examined by the research is the efficacy of the insurance market and whether risk managers feel well served by the risk transfer or mitigation options available to them.
Transparent relationships between businesses, brokers and insurers are vital if risk managers are going to manage intangible risks effectively. This means that insurers and the risk management industry will have to collaborate more closely.
On cyber insurance, for example, BT’s Skinner says that there is still more work to be done to achieve tailored solutions.
“The cover available seems to work well for those organisations who will have an immediate severe impact, such as those who are electronic trading, for example,” she says. “The current solutions available do not seem to respond that well for organisations who may suffer a longer-term impact.”
“For most large organisations, the demand will be for a tailored solution for the things that will impact them, and the industry needs to continue to work hard to tailor products accordingly.”
This chimes with the survey results. Some 64% of risk managers said they want more tailored solutions, 48% called for more guidance from insurers on managing intangible risks and 40% said they wanted more use of new technologies in designing and implementing insurance programmes.
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