The survey suggests organizations do not identify the impacts from the pandemic as insurable. It is going to be more important than ever for organizations to identify and understand future shocks and risks associated with black swan losses to maintain resiliency in response to future events.
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Richard Waterer, Managing Director EMEA, Global Risk Consulting, Aon
Recovery efforts tend to be complex, as companies make a number of decisions quickly while they seek to stabilize the business. Thinking about recovery efforts from a risk management perspective can help prioritize, and the need is clear—the majority of companies say they are only somewhat prepared for the next major shock. Recovery will require a new approach to enterprise risk management (ERM), as only 1/3 of organizations believed their existing ERM program was sufficient to cope with the impact of the pandemic.
Although insurance has provided a limited response to COVID-19, it is expected to play a more prominent role in the future—and the insurance industry needs to innovate to respond to this expectation. Few respondents submitted a COVID-19 claim under their insurance program or captive, indicating that insurance solutions were not viewed as a means to finance risk exposure. Only 13% of respondents said they would be more reliant on insurance or risk financing in the future. Yet future shocks, especially those associated with black swan events, are likely to be costly. Companies have to identify new risk financing strategies as well as unlock new sources of capital, such as intellectual property, and build resilience for those new streams.
The survey showed a consensus among organizations that companies should do more to integrate their corporate risk and insurance activities to ensure their current insurance solutions are effective at financing exposure to existing and emerging risks and helping manage total cost of risk, which will be impacted by the hardening market. For example, 49% of respondents agree or partially agree that the company’s board will be reviewing the ongoing performance of a captive insurance company and 46% agree or partially agree that the board will be investigating the feasibility of a new captive solution to ensure that their risks are covered. The numbers across regions were consistent, indicating that globally, organizations recognize their current insurance structures don’t meet all their needs and that new risk financing alternatives are required.
Despite most respondents considering they had remained resilient, there is a consistent opinion that they need to review business continuity management, which suggests organizations understand the need to re-evaluate their existing plans to apply the lessons learned from the pandemic.
There are a number of enterprise-level risk management strategies companies are now focused on, from risk financing to managing the total cost of risk. To achieve these objectives, the role of risk, and risk managers, should change, and a more cohesive and integrated approach is necessary to recover not only from the pandemic but prepare for future shocks.
Organizational Resilience
Recover