Page 21 - Risk Management Bulletin February 2024

RMAI BULLETIN FEBRUARY 2024

lights the potential for faulty or incorrect assump- sustainability and ethical concerns can lead to
tions made in strategic decision-making processes. reputational damage, legal issues, and loss of cus-
Unverified or inaccurate assumptions can lead to tomer trust.
misguided strategies and ineffective outcomes. 9. AI/Machine Learning Bias: The integration of ar-
2. Cyber Physical Convergence: The convergence of tificial intelligence and machine learning algo-
physical and digital systems creates new risks in rithms can introduce biases if the data used for
terms of cybersecurity. As more devices and sys- training these systems is incomplete, unrepresen-
tems become interconnected, there is an in- tative, or discriminatory. Biased algorithms can
creased vulnerability to cyber threats, such as perpetuate inequality, reinforce stereotypes, and
hacking and data breaches. lead to unfair decision-making.
3. 2020 US Presidential Election: The US presiden- 10. Risk Response Perception: This emerging risk
tial election in 2020 posed unique risks and uncer- highlights the potential for misperceptions or mis-
tainties, including political polarization, social un- understandings about risks, leading to inappropri-
rest, and potential disruptions to the political and ate or inadequate risk response strategies. Inac-
economic landscape. The outcome of the election curate risk perceptions can result in poor decision-
could have significant implications for various sec- making and vulnerability to potential risks.
tors.
4. Macro-Economic Stagnation: This emerging risk Characteristics of Emerging Risk: -
pertains to a prolonged period of slow economic a) Ambiguous: This refers to a lack of clarity in un-
growth or stagnation at a macroeconomic level. It derstanding the risk. In the case of COVID-19, ex-
can lead to challenges such as reduced consumer perts recognized the likelihood of a pandemic but
spending, investment decline, and high unemploy- could not accurately predict its specifics, such as
ment rates, impacting businesses and industries. the timing or severity.
5. Extreme Weather Events: Climate change has in- b) Chaotic Emerging: Risks that are constantly chang-
creased the frequency and intensity of extreme ing and evolving. In the context of COVID-19, gov-
weather events, such as hurricanes, wildfires, and ernment responses have shifted over time, lead-
floods. These events pose risks to infrastructure, ing to a chaotic economic and social environment,
property, human lives, and the overall economy. with changes in lockdown measures, face cover-
ings, and social distancing rules.
6. Industry Recession: Industry-specific recessions
can occur due to various factors such as market c) Complex: Emerging risks often have wide-ranging
fluctuations, changes in consumer behavior, or impacts on multiple factors simultaneously. For ex-
technological disruptions. These recessions can ample, COVID-19 has not only affected public
have significant impacts on specific sectors, lead- health but also had significant economic conse-
ing to layoffs, business closures, and economic quences, leading to recessions, income loss, and
downturns. unemployment.

7. Data Localization: This emerging risk relates to the d) Time-horizon can change: Initially, emerging
regulatory requirements and trends that mandate risks may seem distant or far off, but their
the storage and processing of data within specific timeframe can rapidly change. With COVID-19, the
geographic boundaries. Data localization can cre- pandemic initially seemed like a remote possibil-
ate challenges for multinational companies oper- ity, but within a few months, it spread across con-
ating in multiple jurisdictions, affecting data man- tinents, demonstrating how quickly the risk mate-
agement and operational efficiency. rialized.
8. Sustainability / Ethical Impact: The focus on e) Uncertain: Emerging risks are characterized by a
sustainability and ethical considerations has in- lack of knowledge about their exact nature and
creased, with stakeholders demanding responsible how they will unfold. In the case of COVID-19, the
practices from organizations. Failure to address pandemic risk had been warned about by experts

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