A closer look at a given loss event, of human or natural origin, often reveals a greater impact than appears at first glance. The top risks, when examined, have significant correlations; often a single event can have impact in multiple areas of business and society. Complexity of risk is greater today and so is the speed at which risks can occur. For example, in 1918, an influenza pandemic took nearly a year to spread around the world. Less than a century later, tropical viruses such as Ebola and Zika can travel to virtually any population center on Earth in under 24 hours. Between advances in air travel and the trend in urbanization, a pandemic in the present day could affect a large number of people in a short time. One of the consequences of global pandemic would be the inability of businesses to operate, either from lack of customers, employees healthy enough to work, or both. A public health emergency also could shut down transportation or prompt officials to issue quarantines. A business can face financial loss frommultiple risks, and potentially more than one at once, with knock-on effects for a long time afterward. Consider these scenarios and the opportunity for insuring them: –– Business interruption can be caused by macroeconomic or market developments or changes in legislation/regulation and result in damage to reputation or brand. Property business interruption policies generally are triggered by specific perils that result in physical damage, though not every disruption occurs due to physical loss. –– Cyber incidents can disrupt business operations, damage reputation and brand value and influence changes in legislation or regulation. Downtime from a cyber event can severely limit a business’s ability to serve customers and generate revenue, especially for those that rely on e-commerce. At the same time, the event may cause both first-party loss and third-party liability. –– Changes in market conditions can significantly alter a business’s growth strategy; for example, the sharp drop in oil prices has led some major petroleum firms to abandon costly exploration projects. Redeployment of assets can change the organization’s risk profile and, along with it, the need to reconsider its insurance and risk management approaches.
–– Natural catastrophes, e.g. windstorm, flood, earthquake, can cause widespread loss of life, property damage, business interruption and alter the economic landscape, locally and beyond. For example, an event such as Hurricane Katrina was not only a massive insured loss event but led to long-term population migration, affecting businesses in terms of both labor and customers. For businesses in catastrophe-prone locations, reopening quickly can mean the difference between surviving and closing permanently. –– Disputes over intellectual property and/or regulatory intervention can change the trajectory of a business. Companies in multiple industries have been forced to revise their business plans as a result of litigation from suppliers or actions brought by foreign regulatory authorities. U.S.-based technology companies, for example, have discovered that European Union antitrust regulations canmake the E.U. a costly place to do business. The risks that business leaders cite as those most likely to induce insomnia are seldom confined to single locations. Risk, like the insurance industry itself, is global. Coping with rising volatility and interconnectivity of risk calls for a fundamentally different approach, one that relies on understanding the big picture as well as minute details. That calls for specialist expertise with worldwide perspective.
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