An interconnected global economy threatens to
overwhelm risk management.
If there is one word that could be said to be at the heart of this year’s crop of Risk & Insurance® Most Dangerous Emerging Risks, that word is interconnectivity.
From the multilayered vulnerabilities in our food supply chain, to the
hectoring presence of electronic communication risk hazards, to the use
of social media as a weapon, risk managers seem to be falling under the
worrying dominance of a global interconnectivity, the implications of which
they and the brokers and underwriters they work with as risk management
partners are just beginning to understand.
And that is a characteristic of an emerging risk, in our definition
represented by the big cat that lurks in the shadows of tropical foliage
on our cover. We see a pair of feline eyes and the outline of a head, but
determining whether that cat is a tiger might require more investigation.
According to one of our sources, an emerging risk is a risk that is not on
the average insurance buyer’s radar, but probably should be. Lloyd’s defines
an emerging risk as an issue that is perceived to be potentially significant
but which may not be fully understood or allowed for in insurance terms
and conditions, pricing, reserving or capital setting.
What underpins the story lines we have created are the very real threats
that some underwriters see on the horizon. There may be no loss histories
for these threats. They could be too elusive, or too massive, in some cases,
to get a handle on, but they are threats worth noting and talking about
So taken are we with the effectiveness and immediacy of the scenario
approach to reporting on, presenting and publishing risk management
information, that we have launched a new website, RiskScenarios.com,
which will give risk managers and other insurance professionals a chance to
match their wits against a scenario, provide their approach to a situation,
and then gauge their response against those of other experts who tackled
the same issue.
A Risk Scenario might range from the losses that could accompany a
catastrophic workers’ compensation claim, to the reputational and equity
risk that could face a company with the occurrence of a substantial data
leak due to hacking or some other cybercrime.
Publication of this year’s print issue is timed for the annual Risk and
Insurance Management Society Inc.’s annual conference, which this year
happens in our hometown of Philadelphia. The RiskScenarios.com web site
is set to launch on April 10, the same day that this issue is published.
In our inaugural Emerging Risks issue, which debuted at the RIMS show
in Vancouver last May, we alerted readers to an intensifying solar storm
cycle, which has yet to reach its peak. In January and again in March,
coronal mass ejections of the sun’s surface hurled charged particles toward
Earth at the rate of 630 miles per second, but caused minimal damage. A
storm that could cause widespread devastation to technology similar to the
Carrington Event in 1859 hasn’t happened to date, but that doesn’t mean
Japan’s earthquake and tsunami in March 2011 and the supply chain
disruptions from that event were dissected and discussed throughout
2011 and into 2012. The flooding in 2011 and 2012 that caused so much
supply chain disruption in Thailand inundated 65 out of that country’s 77
Now executives with FM Global and other risk management companies
are turning their attention to Taiwan, home to so much of the world’s
semiconductor manufacturing capacity. What if? What if a typhoon
hit Taiwan in such a way that it rocketed up that country’s West Coast
and devastated Taiwan’s three major science centers, which house its
semiconductor manufacturing capabilities? The technology sector,
automotive and telecommunications sectors are just three of a multitude of
industry segments that would face a severe supply chain pinch point under
such a scenario.
What if, and what would you do?
Therein is the essence of the Risk & Insurance® approach to reporting
on emerging risks and risks that might be considered to be more broadly
known. What if this were to happen and what would you do about it? Rather
than provoke fear, we seek to stimulate conversations among our readers on
how best to approach, plan for and mitigate these emerging risks.
BY DAN REYNOLDS, managing editor of Risk & Insurance®. Dan can be reached at
What would you do?
Risk & Insurance® initiates a new approach in risk
Over the past year, Risk & Insurance® developed and is launching
in conjunction with this issue a new way of reporting on, presenting
and publishing substantial risk management threats and vital
mitigation techniques for its readers.
Dubbed Risk Scenarios, and now available online at
RiskScenarios.com, this new initiative combines interactive
technology with real world scenarios to create compelling learning
Using information gleaned from dozens of interviews with
industry thought leaders, our editors have begun constructing
scenarios that are fictional only in the specific details of their
Our first online scenario outlines the reputational and other
risks that lie in wait should a particularly skilled team of computer
engineers succeed in building an impregnable fortress of stolen data.
In our initial online scenario, titled “The Witches of Maseeh
Hall,” three MIT sophomores who have come under the influence
of a left-leaning professor succeed in hacking the e-mail accounts
of dozens of publicly traded companies. They then post the hacked
information in a searchable format on their secure cloud site.
Readers can then help themselves to email dialogues that prove to be
reputational nightmares to the companies that lost the information.
Well, if that happened, what would you do? Perhaps just as
importantly, what are you doing to make sure that that doesn’t
happen to your company?
Online, as is the case with the scenario we just described, each
Risk Scenario challenges participants to decide how they would
handle an emerging threat. After responding to poll questions about
how they would affect a solution, participants can then read how
other industry experts reacted to a situation or would react to a
Accompanying those responses in some cases will be white papers
by other thought leaders on the topic.
Regardless of the profession, nothing can take the place of
preparedness. We have designed our Risk Scenarios, in the print
edition and online, as challenges, both to stimulate the reader and
better equip them to perform their jobs.
Go to RiskScenarios.com
PHOTO© TONY BLEI/CORBIS