From: Captive International
Organisations should be using their captives to manage emerging risks in a world that is increasingly volatile, uncertain, complex and ambiguous, says Michael Zuckerman of the Temple University Fox School of Business.
The pandemic may end in 2021. Nonetheless we will continue to live in a world characterised by volatility, uncertainty, complexity, and ambiguity (VUCA), requiring most organisations to develop new risk management strategies for a changing risk landscape.
Organisations will need to question why they were not better prepared to mitigate the devastating disruption wrought by COVID-19, despite repeated warnings that a pandemic was coming. Furthermore, organisations must ask whether they are prepared to address the dynamic nature of risk in the 21st century?
In 2020, many organisations were managing multiple crises at the same time. Record-setting wildfires, typhoons, earthquakes, hurricanes, thunderstorms, terrorism, water and food insecurity, threats of future pandemics, and emerging cyber risk trends, among others, characterise the dynamic nature of our risk landscape. And as many risk managers acknowledge, the complex nature of risk presents an opportunity for captive insurance companies.
…organisations must do more to fully understand their exposures and better detect weakness in their current approach to managing risk”Michael Zuckerman, Temple University
McKinsey & Company, in an article titled “Meeting the future: Dynamic risk management for uncertain times”, published by its risk practice in November 2020, argued that “beyond the profound health and economic uncertainty of the current moment, catastrophic events are expected to occur more frequently in the future”.