Risk leaders had a lot to say at Riskworld, a mega conference for insurance and risk management pros, earlier this month in Chicago.
But amid all the talk of tariffs, geopolitics, and artificial intelligence, another key theme emerged: Organizations must view risks not as independent of each other, but interconnected. Doing this pushes company leaders to think differently about the challenges they face and best practices in addressing them, experts told CFO Brew.
“The big theme is the convergence of risk,” Michelle Sartain, US and Canada president at insurance brokerage Marsh, said when we asked what guidance she gives to organizations looking to better manage risks.
“Many companies, they’ll do a risk assessment and they’ll try to itemize what the big risks are for their organization,” Sartain said. “But increasingly, those risks, A) they’re not static, and B) they’re not isolated. It’s the interconnected nature of those risks and the way they layer on each other, and the way that they can ebb and flow, that really require organizations to think of risk as a dynamic, living, breathing thing in their organization that they have to constantly evaluate and reevaluate.”
No longer can company leaders get together once per year to identify risks, then “put them in a drawer” to discuss 12 months later, she said.
Ignoring risk interactions may, in fact, be an organization’s biggest risk of all, according to a November report from RIMS, the risk management association that organizes Riskworld.
“Impacts from interconnections are becoming larger, faster, and more frequent as globalization and economic development evolve, the pace of change continues to accelerate, and life becomes more digitized,” the report said.
What could you, the risk-minded CFO, do differently? In one session, panelists displayed a risk map of sorts, which Carolina Klint, chief commercial officer Europe at Marsh McLennan, described as “a big spaghetti bowl of geopolitical, geoeconomic, environmental, [and] digital risks.” It displayed major risks as nodes of different sizes, with lines connecting them to other risk nodes. The larger nodes were more influential on others.
As complex as the chart may look, it’s beneficial for company leaders to go through this exercise, Klint explained, “because when you do a static risk list it will give you one answer, but when you start thinking about how risks are interconnected—how one risk accelerates and exacerbates another risk—another picture will bubble up, and you will have a totally different landscape to navigate.”
News built for finance pros
CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.
Panelists recommended organizations conduct an “alternative futures analysis” to understand how the world may look under different scenarios. Companies should address external risk factors “like business continuity and supply chain. How do we at least influence those factors so that we minimize those potential outcomes, or we can plan for how to minimize the impact if those things do actually occur?” David Arick, managing director of global risk management at claims administrator Sedgwick, said.
Study guide. Franck Baron, group deputy director of risk management and insurance at health and security risk services company International SOS, said companies should “over-learn” about the risks they face. “Maybe sometimes, we are trying to fix the next risk or the next challenge with the solution we implemented for the previous one,” instead of learning and adapting, he told the audience.
Baron said International SOS regularly conducts crisis simulations and training to “stress test” its operations. The firm constantly changes the simulated scenario because it’s not as worried about how it reacts in a specific situation, such as a cyberattack. “What we want is to make sure that people know how to behave the right way and to decide the right way,” he said.
“It’s really about making sure that the ability to manage resilience in a more efficient manner is at the level we want,” Baron added.
Companies must also get better at sussing out which disruptions are temporary and which represent a new normal, Arick said. Some may have thought early on that AI technology would be a temporary disruption to business, but years later, that’s clearly not the case. The same may go for tariffs and trade tensions, he said.
“Trying to figure out what is noise and what’s really something [companies] need to start dealing with in the long term is a finer point that we need to get better at,” Arick said.