Risk management
Out of the blue R
isks do not normally come out of the blue. Most are well within the familiar ground that risk managers tread. They can be hedged, mitigated or offloaded. Sometimes, however, a catastrophic event can appear from nowhere. Should day-to-day risk management processes prepare an organisation for these eventualities? Some would say no, because the time and effort required to prepare for the unlikely diminishes the resources available to handle more important tasks. Others would say yes because, after all, what is a risk manager’s job if it is not to manage risk?
The world has seen its fair share of high- consequence, low-likelihood events over the past two years. A global pandemic, and now the outbreak of war in Ukraine, are the most obvious examples. Broadly speaking, businesses were prepared for neither – despite the warning signs. “While preparing against this kind of risk may seem counterintuitive given their rarity, planning against such eventualities can be a matter of survival,” says Matteo Ilardo, a risk researcher at Cambridge Judge Business School’s Centre for Risk Studies. “Identifying such existential risks is the
6% Schroders
European share prices in the
automotive, banking and utilities sectors have fallen by this much since the invasion of Ukraine.
Recent history has shown that unforeseen risks need to be taken seriously – not least given their potentially dire consequences. The Covid-19 pandemic, and the outbreak of war in Ukraine, have thrown supply chains into disarray and shut down businesses, and the implications of these disasters are yet to become clear. Jim Banks asks a number of experts – including Tim Chadwick, group chief risk offi cer at PIB Group – about the shift in perspective that is required to manage these dangers.
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