Risk in the business world has evolved significantly, becoming more complex and interconnected than ever before. Previously, assessing risk for a local bakery simply involved considering factors like structure, location, and operations. However, in today’s landscape, businesses are entangled in a web of interconnected risks that span various aspects of their operations.
From utilizing third-party Point of Sale systems to engaging in online sales and managing operations through software-as-a-service providers, businesses are exposed to a myriad of potential risks, ranging from business interruption to liability and property risks. The Accenture Pulse of Change Index highlights the steady rise in the rate of change affecting businesses, emphasizing the intricate nature of the current risk landscape.
Insurance respondents, surveyed in the Accenture Risk Survey, expressed concerns about the emergence of complex, interconnected risks at an unprecedented pace. Financial, regulatory, and operational risks were identified as the top rising risks, underscoring the ripple effect they can have on each other. The study also revealed that risks from other sectors are increasingly impacting businesses as interconnections within industries grow stronger.
In light of the evolving risk landscape, insurers are facing challenges in adequately addressing these heightened risks. The lack of consolidated data, limited access to essential tools for risk assessment, and insufficient skills and technology pose significant hurdles for insurers in effectively managing risks. Despite efforts to enhance risk management capabilities, many insurers admit that their processes have not kept pace with the rapidly changing environment.
As the risk environment continues to evolve, there is a growing emphasis on leveraging technology and predictive analytics to drive profitable growth for insurers. By modernizing technology platforms and embracing generative AI, insurers can enhance their risk management capabilities and adapt to the dynamic nature of risks in today’s business world.
To navigate the intricate web of interconnected risks, insurers must focus on integrating risk processes, resources, and capabilities throughout their organizations. This includes developing a robust organizational risk culture, updating guidelines and renewal profiles, and enhancing risk management activities to strengthen business resilience.
In conclusion, the traditional ‘Back to the Future’ model of predicting risks based on past data no longer suffices in the current environment. Insurers must harness the power of data, emerging technologies, and advanced risk management practices to proactively identify and mitigate risks. By empowering the business with risk-aligned insights and fostering a culture of risk awareness, insurers can navigate the complexity of interconnected risks and drive sustainable business success.
