Understanding the modern risk environment

It is easy to just focus on the pandemic and all the new problems and disruptions it has brought about to the world at large, but the risks that existed before 2020 are still in play today – risks such as NatCAT and cyber.

“A major factor in current emerging risks is the asymmetry. Power that was once only wielded at the state level is now in the hands of small groups and individuals to cause massive harm. We see their attack capabilities strengthening and our defensive capabilities struggling to keep up. This is an era of distributed empowerment that we're in whereby anyone with a laptop could attack even without being a super hacker,” said Willis Towers Watson (WTW) regional director of risk and analytics and head of Southeast Asia David Hill.

Apart from a few distressed sectors, many large corporations ended 2020 reasonably well financially, having adapted to the disruptions caused by COVID-19. Whilst having strong capital bases and government support certainly helped, being agile and decisive are key success factors”, said WTW director of strategic risk consulting partner of Asia James Wong. “We’ve learned the importance of understanding the risk and opportunities presented to adapt to the changing environment and, most importantly, a well-looked after workforce to ride through all the challenges,” he said.

There has been an increased emphasis on cyber and supply chain risk, he said. While these risks are not necessarily new or regarded as an emerging risk, it is when the world starts seeing a systemic risk like a pandemic that these risks have downstream effects.

“A couple of things we learned, after more than a year or so, is that these existing risks can manifest themselves in much more profound ways under drastic circumstances. Many risks are interconnected, and organizations with a developed risk culture where risk ownership and awareness are spread across the business can respond to these changes quickly and more appropriately,” he said.

This article was first published in Asia Insurance Review on 1 July 2021

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