Each year, risk management gains more importance in the eyes of executives and employees across organizations. 2019 will be no different. As the year progresses, expect the true value of risk management to be realized and for it to become a greater priority for many boards. Along with this growth, there will be new trends that increase in importance over last year. With this in mind, here are the top 8 risk trends for 2019. Keep an eye on them and their mitigation strategies to ensure continued success.
The Top 8 Risks to Manage in 2019
1. Political Uncertainty
At the end of March, Britain will be leaving the European Union. Since the vote to leave two years ago, there has been endless debate on the terms of their exit and the impact it will have on the economic well-being of the UK, the EU, and individuals. 2019 also began with a continued government shut-down in the United States, resulting in hundreds of thousands not working or working without pay.
These types of political situations can be unpredictable and have an impact on organizations of all sizes. In this seemingly unstable environment, risk managers must ensure they have a strong understanding of how politics may affect them and what they can do to minimize the consequences. For example, any company that does business with the UK or the EU should conduct an analysis on how it could potentially impact their operations in those countries and prepare themselves accordingly.
2. Artificial Intelligence and Automation
Humans have found ways to eliminate redundant tasks and streamline processes through AI and automation. While these bring tremendous benefits to all industries, including insurance and risk management, it’s important to consider the risks as well. Organizations must ensure they are using AI for the right reasons (i.e., that it actually brings value and serves a purpose) and are installing systems that are fully secure.
Another risk to consider in this area is the risk of being left behind. As more companies offer AI and automation-based services, customers may come to expect a certain level of service and benefits. An organization that has not taken advantage of the benefits of these changes may find themselves losing customers to more advanced competitors.
3. The Internet of Things and Cloud Usage
Similar to the last point, more organizations are adopting IoT (a web of interconnected, smart devices) and the cloud. These bring new benefits to customers and make employees’ jobs easier, but only if they are implemented correctly. Security is of utmost importance.
4. Cyber Risk and Data Breaches
With the increasing number of computers and Internet-based systems comes increased cyber risk. Cyber risk has grown in significance year over year to overtake many traditional risk concerns. In Allianz’s 2018 Risk Barometer Report, cyber risk is now identified as the 2nd most important business risk. Data breaches are no longer considered an issue of “if”, but “when”.
Cyber risk is a complex area that all risk managers should view as a priority. Educating employees, conducting audits, and managing the aftermath of an incident are all points that need to be considered. For more information, check out our blogs on 8 Best Practices for Managing Cyber Risk and 30 Questions to Ask Vendors to Reduce Cyber Risk.
5. Reputation Risk
In the age of social media, one small occurrence can turn into a viral problem for an organization. A single customer has the power to ruin a hard-earned reputation. In light of this, organizations must have extensive social media response plans, both for dealing with complaints and to address actual crisis.
Sexual harassment is another issue that is increasingly coming to light. Organizations should educate and train all employees thoroughly to reduce any risk of such incidents. Any risk manager concerned with this area of risk should consider the following mitigation strategies: 6 Ways to Manage Reputational Risk.
6. Severe Weather and Natural Disasters
Climate change is a reality we are now facing. The environment has grown increasingly unpredictable, leaving risk managers to handle an increased number of storms, earthquakes, and similar phenomena.
Depending on an organization's location, risk managers should create emergency preparedness plans for all likely events. This includes monitoring the weather ahead of time, taking necessary precautions, and putting the safety of employees first in dangerous situations. For more on preparing an organization for emergencies, read our blogs on hurricane preparedness and tsunami preparedness.
7. Economic and Financial Risk
No matter what is occurring at a given moment, organizations always face the potential of financial risk. A product may not sell as expected, a change in material inputs may increase the cost of goods, or a customer may refuse to pay off their credit. Either of these scenarios can set back an organization, and often have a domino effect: the loss of cash in one area results in negative consequences in another.
For this reason, it is important for risk managers to ensure there is sufficient cash on hand to handle these types of situations. The organization can also prepare by having mitigation strategies in place that reduce the likelihood of these incidents.
8. Employee Risk
Employees often present the greatest risk to an organization, but risk managers can combat these with the right procedures and training, as detailed in 5 Tips to Manage Employee Risk.
The first factor associated with employee risk is retaining and motivating staff. Over their time at an organization, employees gain extensive knowledge and insight into the inner workings of the company and the work they do. Without effective knowledge capture strategies, this can be lost with the employee, creating a larger risk for new employees. Risk managers must find a way to keep their best staff and motivate them to do the best work possible, and minimize the risk created by those who leave.
Another employee risk involves the mistakes they can make, ranging from physical accidents to data breaches. Without effective training, employees may not know the right actions to take in any given situation, greatly increasing the risk to themselves, their coworkers, and the organization as a whole.
Risk management begins with an awareness and understanding of the risks an organization faces. Only then can its employees begin work to prevent them. By carefully monitoring and protecting against these risks, risk managers have the opportunity to enhance the level of success their organization experiences in 2019.
What are your thoughts? What are the risks you’re most aware of for the upcoming year? Let us know in the comments below or contact us to discuss the mitigation strategies that will work best for you.
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