Page 76 - India Insurance Report 2023- BIMTECH

64 India Insurance Report - Series II

Managing the World of Emerging Risks

- Shankar Garigiparthy
8 Country Manager & CEO, Lloyd’s India

Encountering something unexpected, where there was no foresight or data available to predict, has
devastating and far-reaching consequences for any industry. The COVID-19 Pandemic, for example,
shook the entire Insurance industry and re-emphasized the importance of risk management for these
unexpected risks. In addition to pandemics, other risks include climate change, resource shortages, supply
chain interruptions, stresses upon the global financial situation, crypto currency value fluctuation, and
unforeseen developments linked to the deployment of technologies, such as artificial intelligence and
robotics. Hence, it is not only important, perhaps vital, to look ahead to the future risks that are emerging
and which could pose challenges if they haven’t already.

The world is a rapidly evolving place, and unexpected risks from various undiscovered segments are
getting more challenging than ever before. The financial impact from these new or less developed risks
can cost the global economy hundreds of billions (USD) every year, and those losses are only anticipated
to grow in the years to come. How the industry prepares itself for these risks will be critical for successfully
limiting the impacts on the industry.

So, as risk managers, we need to understand what emerging risks are and answer a few interesting
questions like - are we fully aware of these risks, and do we know how we will be able to mitigate or
minimise them? Let us first understand what emerging risks are.

Ask ten different risk management experts to define emerging risks, and there could be different
points of view. In this article, let’s define emerging risks, discuss ways to identify them, and look at
different ways to manage these risks.

1. What are Emerging Risks?

An emerging risk is: “a risk resulting from a newly identified hazard to which a significant exposure
may occur, or from an unexpected new or increased significant exposure and/or susceptibility to a
known hazard.”

The International Risk Governance Council (IRGC) defines emerging risks as “new risks or familiar
risks that become apparent in new or unfamiliar conditions.”

The CRO Forum defines emerging risks as “risks which may develop, or which already exist that
are difficult to quantify and may have a high loss potential.”

The future is unknown, and opportunities would be abundant. So, on a regular basis, new