‘What to tackle first?’ To many, it’s the query that’s shaping the insurance coverage panorama in 2023 after stories from organisations, together with the World Economic Forum, BIBA, Aviva, Gallagher Re and Howden, underscored the interaction of exterior dangers impacting companies and creating monetary and operational challenges.
But for threat managers comparable to Airmic board member, Richard Hoult (pictured), whose function it’s to keep watch over the danger horizon, it’s important that companies additionally don’t lose sight of the all-important questions of ‘what if?’ and ‘what next?’ Outlining the growing significance of horizon scanning in companies of each measurement and sector, Hoult, who serves as head of threat and inside audit at Portakabin, first outlined the 4 traits that outline horizon scanning.
“Horizon scanning is the proactive, forward-looking activity of identifying new risks to an organisation,” he mentioned. “The four characteristics that identify these risks are that they are plausible, relevant, new to the organization in question and beyond the normal time horizon of risks identified by that organization.”
For Hoult, constructing superior understanding, curiosity and acceptance of horizon scanning as a important instrument within the toolkit of organizations has been a long-standing dedication. And having spent over a decade in threat administration roles at corporations together with British Gas and Thames Water, he has seen first-hand how these conversations are slowly however absolutely starting to evolve.
“I joined Portakabin about five months ago,” he mentioned. “My role is to lead our risk and internal audit function which was previously outsourced, and bring it in-house so it can help support the business’s growth strategy as we’ve got some exciting growth targets as a business. To be asked to come and help support that is great and really refreshing as risk managers don’t often get pro-actively invited to the table to get involved with the strategy and forward-planning piece.”
That shift from threat administration as an afterthought to embedding threat administration into the DNA of a enterprise’s strategic development goals has been attention-grabbing to see, Hoult mentioned. So, he’s eager not simply to proceed the dialog throughout the danger administration sector but additionally to evolve its boundaries – with horizon scanning a important consideration.
Horizon scanning permits companies not simply to see into the long run but additionally to register the affect these horizon dangers could have after they change into too urgent to be ignored any longer. Highlighting the potential worth of the software, Hoult highlighted provide chain issues (at Thames Water) across the availability of chemical compounds required to deal with water and shifts within the telephony atmosphere with the transfer from analogue traces to digital, and the way horizon planning may have been used proactively to place structured methods in place.
He famous that understanding challenges past the rapid – a few of which don’t should be tackled immediately however do should be assessed and recognised – is what permits companies to put money into the infrastructure essential to forestall the danger. That forward-planning is what permits enterprise leaders to do the budgeting, useful resource planning and labour allocations forward of time to make sure that they’re higher ready for long-tail dangers.
The mistake of not seeking to the long run isn’t distinctive, Hoult mentioned. “Some companies have the identical view of leaving it to later, or leaving it too late, or not even recognising these dangers as horizon dangers. That’s one of many irritating issues round horizon scanning – as a threat supervisor you may flag the dangers and put your hand up to ensure the manager staff and the board are conscious of them – nevertheless it’s right down to their urge for food whether or not or not they really do something with it.
“So, what I want to do is make sure they’re making informed decisions, making sure they’re being given insights into how they can prioritise investments now and into the future,” he mentioned. “It’s about them being empowered to make conscious decisions rather than under pressure decisions. I also think it helps the boards of organizations get a level of comfort and assurance that the business is thinking about things that are outside of the normal planning horizons and really looking to the future.”
Understandably, most government groups are typically trying solely a yr or possibly two years forward, Hoult mentioned, whereas boards take a longer-term view of technique. And so horizon scanning affords a chance for management groups to all be dealing with in the identical route. Having that visibility of the long run is important, and understanding what’s coming down the traces permits for extra open, collaborative discussions round budgeting and areas of strategic focus.
“This risk management instrument is still fairly immature for most businesses, and it’s not a concept that people use all the time,” he mentioned. “So, I think it’s one of those things that where people find easier ways to present their findings and use them, horizon scanning will start to be used more and will start becoming a go-to tool that a risk manager can use.”
From discussions with different threat managers, Hoult famous there may be demand for a complete framework that may present construction to the horizon scanning initiatives. With so many doable dangers to consider, threat managers want a technique to break these down by relevance and by timing, planning and useful resource commitments. It could be useful to have that framework in place, constructed by threat managers and portfolio managers and geared toward supporting the broader career in creating the proper buildings to quantify, mannequin and in the end handle horizon dangers.
“As a board member at Airmic, I think this will help move the profession forward, and I’m keen to support the implementation of such a framework or model, because I haven’t found one yet that’s applicable and accessible to a range of businesses and industries,” he mentioned. “The proper mannequin will transfer horizon scanning out of the realm of being a theoretical software, it is going to embody inputs round prices, the relevance of dangers and the way these dangers would possibly affect your technique as a enterprise.
“I see it as a set of questions that would help you come up with a score. And that score would tell you where you should be spending your investment budget now to prevent you from having to get to panic stations in the future.”
What are your ideas on the advantages of horizon scanning? Please be happy to share your feedback beneath.