With major change and challenge across the world’s economies and infrastructure, the companies that anticipate and adapt will define resilience and the future. Here are key risks to watch as we move forward.
The Risk Matrix, produced by the editorial team at Risk & Insurance®, plots critical risks across industries that might be too large for risk managers to avoid, but not too large to manage with the right preparation.
Power grid vulnerability
In February 2021, Winter Storm Uri caused blackouts for more than 9.9 million Americans. The 2021 Dixie Fire in California started when Pacific Gas & Electric transmission lines ignited, burning nearly 1 million acres and destroying more than 1,300 homes. The Colonial Pipeline hack caused weeks-long fuel shortages across the nations. With the risk of long-term power outages on the rise, it’s critical for organizations in every industry to consider the impact of prolonged power loss on their businesses, from property risks to business interruption, environmental factors, and beyond.
With the litigation funding market estimated to reach $22 million by 2027, continuing to watch social inflation is a must. Many factors are coming together to drive this legal phenomenon, including socially conscious deliberations, polarized jury pools, and the “anchoring” of dollar values, wherein jurors benchmark payouts against their personal observations. Risk managers should seek to understand the key drivers of social inflation, including the current case backlog and savvy plaintiff’s bar, along with strategies to help control costs.
Businesses operating on a multinational scale must be aware of political happenings across the globe. Even a small hint of political unrest can lead to business delays, inhibiting daily function. Modern-day crises demonstrate the severity of this risk, from the continued war raging in Ukraine, to Canadian trucker protests, a continued pandemic, and more.
A 2020 study on climate found that 78 percent of leaders at Fortune 500 companies believe managing climate-related risks is critical in keeping their jobs over the next five years. It’s no surprise when climate change threatens the long-term vitality of many organizations. The Securities and Exchange Commission has even begun discussions on mandatory climate disclosure requirements. Businesses should keep on top of climate-related regulatory trends, as well as other risk areas on the horizon.
Having overstrained, absent, or untrained workers carries insurance risks, from increased injuries and professional and product liabilities to potential auto accidents and damaged equipment. Reports show the labor shortage is growing month over month, with an estimated 4.6 million more job openings than unemployed workers. Industries like healthcare, construction, manufacturing, and more will need to review these labor trends in order to continue productivity while preventing injury and illness. Luckily, there are mitigation steps they can take now.
Cyber threats, particularly ransomware, are reaching massive proportions. Each year, their costs are estimated to rise 15 percent. That’s on par to reach $10.5 trillion by 2025. Added to that, current tensions across the globe can add to the cyber risk landscape and give way to uncertainties. There are several ways to be cyber smart, though, including making the board aware and involved in the cyber resiliency response. Businesses must also review cyber controls, train employees on phishing and other such scams, and make a practice of backing up sensitive data.
The idea of protecting personal information has become common practice among consumers, changing the way they approach digital and in-person retail. Yet only 22 percent of retailers have optimally integrated their data privacy plan with corporate and business unit strategy planning, says Deloitte. Regulators are also introducing new privacy-focused laws, creating a space for error on the part of retailers and opening them up to liability and cyber risk.
Supply chain disruption
In a recent survey from Fortune, 94 percent of the Fortune 1000 companies saw COVID-19-related supply chain disruptions. Manufacturing, construction, and similar industries are feeling the pull as material shortages put a strain on pricing. Added to that, global supply chains can be complex, so the risk mitigation strategy has to be designed to fit supply chain disruption intricacies across borders. One option: some U.S. ports are operating 24/7 to process shipping backlogs; however, without adequate staffing or space to unload goods, employee well-being is another concern.
Environmental, social, and governance
Consumers, activist groups, and the general public want more from the companies they interact with. Environmental, social, and governance (ESG) programs are just one way they are watching corporations, and the demand to abide by honest and true ESG standards is reaching new highs. Customers and stakeholders alike are looking for business leaders to address their environmental impact and promote diversity, equity, and inclusion (DEI) at their companies. Consumers are relying more on their values to determine what businesses they want to support with their dollars.
The Risk Matrix is featured with the permission of Risk & Insurance®. The Risk Matrix is produced by the Risk & Insurance editorial team.
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