Only two in 10 (20%) key decision makers and the teams supporting them believe their organization will be able to respond adequately to risks that might emerge in the next 10 years; and only one in two respondents (50%) are confident their organization’s approach enables it to respond to today’s risk environment, according to the Emerging and Interconnected Risks Survey published today by WTW (NASDAQ: WTW), a leading global advisory, broking, and solutions company.
The survey report assesses the key emerging risks identified by 333 respondents from 55 countries and proposes practical recommendations for organizations, considering improving their understanding of emerging risks. Collectively, the organizations surveyed employ an estimated 1.3 million people and create US$2.3 trillion in revenue. Three types of employees were consulted: senior leaders, teams supporting senior leaders and charged with implementing action and wider employees. Respondents come from 14 different industries, with a particularly strong representation from the transportation, financial institutions and natural resources sectors.
The survey was designed by the WTW Research Network to take respondents through successive stages of thinking across four lenses using a new risk taxonomy of 48 risks across eight categories. Respondents were asked to consider the impact on their organization of the risks of today (‘current emerging risks’), of tomorrow (‘risks that will emerge over the next two years’), of the future (‘risks that will emerge over the next 10 years’) and the interconnectivity between those risks.
Technology dominated the emerging risks agenda, with artificial intelligence, cyber risks and the future of technology named among the top risks of today and tomorrow. Technology was also named as the greatest expected driver of change in the next 10 years. Geopolitical issues closely followed as a top concern today and tomorrow, as organizations highlighted a wide range of emerging risks fostering volatility, from elections to societal cohesion to the misalignment between government and business interests.
Continued amplification and acceleration of the environmental risk category dominated the longer-term view. Over the next 10 years, 47% of respondents said they expected climate change and climate transition risks to be a key source of change with wider mentions of environmental degradation, the need for policy change to deal with future heat risks, the arrival of tipping points, power requirements and regulation featuring alongside concerns of physical risk events. Organizations expect to see more frequent catastrophic events and are uncertain about what that future might look like.
When it comes to actionable insights, 40% of respondents in the wider colleague sample say that they have never been asked to feed into their organization’s emerging risks evaluation. One in two respondents (49%) was unable to specify the emerging risks that most concerns their organization, despite the majority being able to identify the top five changes they expect to see over the next two (95%) and 10 years (90%). This suggests there is opportunity to enhance internal intelligence processes through structured approaches. Action is needed to connect institutional pockets of risk intelligence and ensure a coordinated approach across the organization. Scenarios were seen as valuable ways (43%) for organizations to tell that story and determine the appropriate strategy.
Adam Garrard, global chairman, risk and broking, WTW said: “The ability to effectively manage risk is key to thriving in an uncertain world. With regulators globally deepening their own exploration into emerging risks, investors asking more and more questions, and organizations facing material financial consequences as risks evolve, there is a need for new approaches. We need more than data-informed decision making to explore the emerging risks shaping risk and opportunity. We need to focus on optimizing risk outcomes. Smart specialization, smart service, smart use of data, smart research. It all comes together to help navigate the complex risk landscape.”
Lucy Stanbrough, head of emerging risks, WTW Research Network said: “We are witnessing a continual evolution of threats, which means we need a smarter way to think about emerging risks. Every single risk in our survey was someone’s top risk, which shows there’s a real need for enhanced understanding a wide range of interconnected risks. Organizations recognise that they are not managing emerging risks as well as they wish they were at the moment, and are focused on changing that. When we look at the actions that organizations are looking to take in the next two years, putting an emerging risk a framework in place was top of the list. Ensuring that framework is part of the business model cannot be emphasized enough. Organizations that manage to do this successfully and find the opportunities among relentless change, will prove to be more resilient and performant.”