Survey of Emerging Risks – Risk Combinations

By Max J. Rudolph, FSA

The 15th Survey of Emerging Risks, sponsored by the Canadian Institute of Actuaries (among others), was posted in August 2022 and will be presented at the 2022 Appointed Actuary Seminar. In addition to the full report, a user’s guide has been created to aid practitioners in absorbing the material.

The survey asks questions about current risks, emerging risks, and combinations of emerging risks. These combinations, sometimes called risk clusters or compound risks, can occur concurrently or sequentially.

Results are accumulated in two ways. In the first, each of the 23 suggested risks is aggregated individually. This tells us which risks matter most in combination with other risks and could be termed “threat multipliers.” Think about another risk and how it interacts with these top five ranked risks. You’ll find that they make nearly every other risk worse (in some cases, for example, a combination of disruptive technology and chronic diseases, both risks could have positive impacts) than the risk would be by itself.

  • Climate change
  • Cyber/networks
  • Financial volatility
  • War
  • Disruptive technology

For example, climate change increasingly disrupts our daily lives through weather extremes, but it indirectly impacts government spending on education and health care because resources are limited and spending to rebuild means less money is available for other projects.

In the survey, two risks are selected for up to three combinations. The top combinations selected were:

  • Cyber/networks and Disruptive technology
  • Asset price collapse and Financial volatility
  • Pandemics/infectious diseases and Chronic diseases/medical delivery
  • Climate change and Loss of freshwater services
  • Climate change and Natural catastrophe: severe weather
  • Terrorism and Cyber/networks

When risk managers are thinking about risks, cognitive biases that focus on recent risks often come into play. For example, in 2022, a survey of current risks would be expected to see a surge in the risk of “War” as one that is important. We saw that in 2020 with the pandemic. An approach that incorporates foresight will improve proactive responses. You won’t identify every single emerging risk that happens, but not everything is a black swan. Train yourself to think with a longer time horizon, strategically, and in a way that allows risks to interact in combination with one other. The companies that encourage this are more likely to survive and make better decisions that allow them to thrive.

Explore the key findings of the 15th Emerging Risks Survey, authored by Max Rudolph, and learn risk managers’ plans for the future at the Appointed Actuary Seminar, September 13–15, 2022. Registration closes on September 7, 2022.

Max J. Rudolph, FSA, is a Principal at Rudolph Financial Consulting.

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