Whilst volatile market conditions, regulation and compliance are just some of the concerns which are making it increasingly important for brokers and insurers to provide clients with sound risk management advice to help them mitigate risks, the risk landscape continues to evolve at a rapid pace.
With this FAnews spoke to Spiros Fatouros, Chief Executive Officer at Marsh South Africa, about the risk landscape and the findings in Marsh & McLennan Companies Global Risks Report 2018.
The top risks identified
In discussing the top risks according to the report Spiros said, “The top risks we have identified are mainly northern hemisphere risks and these risks have become dominant due to the very large land masses occupying the northern hemisphere and the impact of increased global warming across these land masses, as well as the over-populations occupying the northern hemisphere. Hence, extreme weather events such as the well reported massive hurricanes, tornadoes, storms, city flooding, severe cold (snowbound), dense air pollution and droughts that took place last year.”
“Natural disasters such as earthquakes, tsunamis, volcanoes, mudslides and wildfires have occurred. Cyber attackers are allegedly seated in northern hemisphere Asian countries and those attacked are mainly large American, European, Asian and Far-Eastern enterprises. There were serious attacks. Weapons of mass destruction are all located in northern hemisphere countries, which are also the potential mutual targets for such weapons. The big political changes are also up north such as Brexit, the EU, the Trump administration, Israel, Korea etc, as are the rising prices of property, high debt levels and cost of currencies (Bitcoin for example),” said Spiros.
“If we consider the southern hemisphere and the comparatively far smaller land masses of South America, Australasia and the lower parts of Africa then, for the lower parts of Africa we need to pick other risks from the top thirty risks as identified in the Global Risks Report 2018. These would include the likes of failure of infrastructure, high unemployment, illicit trading, fiscal crises, national governance failures, urban planning failures, migration, water crises and a few more (all as defined in Appendix A of the Report),” continued Spiros.
No signs of slowing down
“If we can accept that the two dominant drivers of the top ten (or even all thirty) identified risks are continued global warming and over-population, then one would have to say the risks will increase in the future, as neither driver is showing any signs of slowing down,” he said.
“The efforts of the United Nations on global warming are well documented and have been going on for many decades without any real support from the member nations. The USA has recently pulled out of the Paris Agreement. Global warming continues. Over-population is behind many identified humanity trends in the report such as the intense scrambles for education, equality, identity, employment, property, wealth, domination, power, own ideologies, security and the like. The world population is incrementally increasing,” emphasised Spiros.
Of those surveyed in late 2017 for the Global Risks Report 2018, Spiros highlights, almost 60% responded that the range of identified risks would increase.
Limited ability to minimise effects
The big generic future fears, according to Spiros, are the rapid pace of global development and technologies coupled with our inability to prevent most of the identified risks from taking place and, if they do strike, our limited ability to minimise the effects or consequences of them or prompt recovery from them.
“We have very capable risk management resources in South Africa in terms of thought leadership, data manipulation facilities, technologies and even super-technologies, all at a reasonable corporate price. However, many potential buyers of the product perhaps think “it will likely never happen to us” and fail to take advantage of the wealth of risk management products and services available to them,” Spiros said.
“With the risk landscape increasing in terms of proliferation of new risks, greater incidence and increased severities, risk managers should continue to actively intensify their learning, hone their skills, push their products and services and hope that the measures offered will be accepted and will play a significant part in preventing, mitigating or successfully transferring risks arising in the future,” continued Spiros.
Nevertheless, he says, this is where established risk management principles, well known to our industry, can be carefully applied to see where each major risk or new risk is and these are: identified, prepared for, prevented, minimized, insured against, recovered from quickly and prevented from happening again (hopefully).
“This might require the efforts of an individual, a whole business, an entire industry, an association, a municipality, a region, a country or a bloc of nations,” he said.
“In addition, while the Global Risks Report 2018 represents many considered and valuable views of the “Surveyed class of 2017” (as they perceived 2018 and beyond), we in 2018 must already keep our eyes open for any significant changes taking place for the better, the same or the worse. The report postulates that we should look out particularly for food supply shortages, AI substitutes, trade limitations, democracy failures, exhaustion of natural resources, major company failures (Steinhoff), too many human enhancement drugs, wars without rules and losses of individual or national identity,” concluded Spiros.
Instead of dwelling on the negatives we need to focus on the positives and how we, as an
industry, can grow and prosper. Insurers will need to continue with proactive risk monitoring and provide insurance solutions. In considering where we (the world) are going and how things are changing and evolving at such as rapid pace, as new risks continue to emerge will this not get more challenging? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts mailto: email@example.com.
This article is published courtesy of FAnews.
Original article can be found at https://www.fanews.co.za/article/short-term-insurance/15/general/1217/where-are-we-heading-to/24210