2017 Most Dangerous Emerging Risks

2017 Most Dangerous Emerging Risks

We focus on the risk mitigation and coverage challenges of climate change, economic nationalism, cyber business interruption and artificial intelligence.
By: | April 7, 2017 • 4 min read

Every year since 2011, Risk & Insurance® editors and writers have set about determining the Most Dangerous Emerging Risks for a package that runs in our April issue. As we’ve monitored which risks have the potential to cause the most damage, one thing is becoming apparent: Most Dangerous Emerging Risks seem to be emerging at a faster and faster rate.

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Just last year, we wrote about the risk that a populace that self-selects information sources, relying mostly on unsubstantiated sources on the internet, could come to erroneous conclusions, with dangerous consequences.

We called that story “Fragmented Voice of Authority.”

Fearful proof of that premise came to life in December when a gunman shot up a pizza parlor in Washington, D.C., after reading bogus information on the internet that former Secretary of State Hillary Clinton was running a child sex ring there.  Fortunately, no one was injured in that incident.

Now it looks like fake news stories emanating from Russia could have played an interfering role in our Presidential election.

Another focus of last year’s issue was our crumbling infrastructure. That topic received terrifying confirmation when heavy rainfalls pushed California’s aged Oroville Dam to the bursting point. Should the dam break, billions in real estate losses as well as potential loss of life would result.

That April 2016 story, titled “Crumbling Infrastructure: Day of Reckoning,” warned that we now face the consequences for too long foregoing spending on important infrastructure upgrades.

We’ve seen that Most Dangerous Emerging Risks can take years to develop and emerge. But in both of these cases, they emerged in a matter of months.

The process of determining the Most Dangerous Emerging Risks begins in January, when we start placing calls to insurance carriers, risk modelers and brokers.

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We ask executives with those companies to engage us in an off-the-record conversation about which risks concern them the most. A defining characteristic of a Most Dangerous Emerging Risk is that it has the potential to cause widespread losses, but might not be on the radar of many risk managers.

Once we pick the brains of industry executives, we compile a list of the risks that look like they could qualify as Most Dangerous Emerging Risks. The editors then meet to determine which of those risks we should focus on for the April issue. It’s at that stage that we go back to our original sources, and if we picked one of their stories, ask them for an on-the-record interview on the topic.

This year, after distilling our conversations with our sources, we came up with five emerging risks that could cause massive losses for commercial insureds and carriers.

The risk that sea rise could wreck coastal real estate values is one. Economic nationalism, both domestically and globally, are two and three.

The layered risk presented by the use of artificial intelligence in manufacturing and other processes is our fourth most dangerous emerging risk this year, and the threat that hackers could take down the internet and cause massive cyber business interruption is number five.

Experts say that trillions in property values could literally be underwater due to sea rise in the next mortgage cycle, or the next 30 years, according to a story by editor-in-chief Dan Reynolds.

Hopes are that public and private sector stakeholders can pull together to devote the thought and the resources necessary to create the infrastructure necessary to protect our ports, our office buildings and our homes from sea rise.

China is doing it and we should too.

The risk that many find most concerning is the fear that a hack could take down the internet.  Business interruption for that kind of event would be so widespread that insurers just can’t cover it.

Check out managing editor Anne Freedman’s story on that risk.

Protectionism is on the rise in this country. Politicians that want to firm up our borders represent a threat to supply chains and the free flow of commerce.

The U.S. tech industry, in particular, fears a talent shortage should the new administration’s efforts to limit immigration become law. Associate editor Katie Siegel’s piece details that risk and others that stem from domestic protectionism.

The fear for multinational companies, according to a story by staff writer Juliann Walsh, is that global business uncertainty will increase unduly; prompted by events such as Britain’s vote to leave the European Union and Venezuela’s decision to close its borders with Brazil.

Associate editor Michelle Kerr’s piece looks at the tangle of liability questions created by artificial intelligence.

Our award-winning Most Dangerous Emerging Risks coverage is, of course, intended not to scare people but to advance the thought leadership and dialogue we need to mitigate risk and ensure a more resilient, sustainable economy.

On that point, we can all agree. &

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2017 Most Dangerous Emerging Risks

Artificial Intelligence Ties Liability in Knots

The same technologies that drive business forward are upending the nature of loss exposures and presenting new coverage challenges.

 

 

Cyber Business Interruption

Attacks on internet infrastructure begin, leaving unknown risks for insureds and insurers alike.

 

 

U.S. Economic Nationalism

Nationalistic policies aim to boost American wealth and prosperity, but they may do long-term economic damage.

 

 

Foreign Economic Nationalism

Economic nationalism is upsetting the risk management landscape by presenting challenges in once stable environments.

 

 

Coastal Mortgage Value Collapse

As climate change drives rising seas, so arises the risk that buyers will become leery of taking on mortgages along our coasts.  Trillions in mortgage values are at stake unless the public and the private sector move quickly.

The R&I Editorial Team can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

As a professor of business, Jack Hampton knows firsthand the positive impact education has on risk managers as they tackle growing risks.
By: | April 9, 2018 • 4 min read

R&I: Who is your mentor and why?

Ellen Thrower, president (retired), The College of Insurance, introduced me to the importance of insurance as a component of risk management. Further, she encouraged me to explore strategic and operational risk as foundation topics shaping the role of the modern risk manager.

Chris Mandel, former president of RIMS and Risk Manager of the Year, introduced me to the emerging area of enterprise risk management. He helped me recognize the need to align hazard, strategic, operational and financial risk into a single framework. He gave me the perspective of ERM in a high-tech environment, using USAA as a model program that later won an excellence award for innovation.

Bob Morrell, founder and former CEO of Riskonnect, showed me how technology could be applied to solving serious risk management and governance problems. He created a platform that made some of my ideas practical and extended them into a highly-successful enterprise that served risk and governance management needs of major corporations.

R&I: How did you come to work in this industry?

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From a background in corporate finance and commercial banking, I accepted the position of provost of The College of Insurance. Recognizing my limited prior knowledge in the field, I became a student of insurance and risk management leading to authorship of books on hazard and financial risk. This led to industry consulting, as well as to the development of graduate-level courses and concentrations in MBA programs.

R&I: What was your first job?

The provost position was the first job I had in the industry, after serving as dean of the Seton Hall University School of Business and founding The Princeton Consulting Group. Earlier positions were in business development with Marine Transport Lines, consulting in commercial banking and college professorships.

R&I: What have you accomplished that you are proudest of?

Creating a risk management concentration in the MBA program at Saint Peter’s, co-founding the Russian Risk Management Society (RUSRISK), and writing “Fundamentals of Enterprise Risk Management” and the “AMA Handbook of Financial Risk Management.”

A few years ago, I expanded into risk management in higher education. From 2017 into 2018, Rowman and Littlefield published my four books that address risks facing colleges and universities, professors, students and parents.

Jack Hampton, Professor of Business, St. Peter’s University

R&I: What is your favorite book or movie?

The Godfather. I see it as a story of managing risk, even as the behavior of its leading characters create risk for others.

R&I: What is your favorite drink?

Jameson’s Irish whiskey. Mixed with a little ice, it is a serious rival for Johnny Walker Gold scotch and Jack Daniel’s Tennessee whiskey.

R&I: What is the most unusual/interesting place you have ever visited?

Mount Etna, Taormina, and Agrigento, Sicily. I actually supervised an MBA program in Siracusa and learned about risk from a new perspective.

R&I: What is the riskiest activity you ever engaged in?

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Army Airborne training and jumping out of an airplane. Fortunately, I never had to do it in combat even though I served in Vietnam.

R&I: If the world has a modern hero, who is it and why?

George C. Marshall, one of the most decorated military leaders in American history, architect of the economic recovery program for Europe after World War II, and recipient of the 1953 Nobel Peace Prize. For Marshall, it was not just about winning the war. It was also about winning the peace.

R&I: What about this work do you find the most fulfilling or rewarding?

Sharing lessons with colleagues and students by writing, publishing and teaching. A professor with a knowledge of risk management does not only share lessons. The professor is also a student when MBA candidates talk about the risks they manage every day.

R&I: What is the risk management community doing right?

Sensitizing for-profit, nonprofit and governmental agencies to the exposures and complexities facing their organizations. Sometimes we focus too much on strategies that sound good but do not withstand closer examination. Risk managers help organizations make better decisions.

R&I: What could the risk management community be doing a better job of?

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Developing executive training programs to help risk managers assume C-suite positions in organizations. Insurance may be a good place to start but so is an MBA degree. The Risk and Insurance Management Society recognizes the importance of a wide range of risk knowledge. Colleges and universities need to catch up with RIMS.

R&I: What emerging commercial risk most concerns you?

Cyber risk and its impact on hazard, operational and financial strategies. A terrorist can take down a building. A cyber-criminal can take down much more.

R&I: What does your family think you do?

My family members think I’m a professor. They do not seem to be too interested in my views on risk management.




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]