FERMA believes that it is crucial to raise awareness about the value of professional risk management practices in the public, as well as the private, sector. We all depend on the maintenance and quality of public services and public infrastructure, especially in cities. Therefore, increasing urban resilience should be our common objective along with increasing the resilience of our businesses.
This is the message that the President of FERMA Jo Willaert and the Secretary General Gilbert Canameras took to the high level conference on urban resilience, organised by European institutions on 31 May and 1 June in Brussels.
Further evidence of the importance of urban resilience came only a few days later with the publication of the 2018 Global Risk Index, created by the Centre for Risk Studies at the University of Cambridge for Lloyd’s Cities at Risk. The index is an annual quantification of the potential economic impact or GDP@Risk of unpredictable shocks to 279 the world’s most prominent cities.
The Centre believes that the underlying analytics for the index provide a methodology that governments, infrastructure providers and other organisations can use to quantify economic value of improvements in city resilience. The Global Risk Index also highlights the gap between the catastrophe exposures and current levels of insurance coverage.
We strongly support the use of such tools as part of an enterprise risk management approach for cities. As the Risk Centre argues, the speed and extent to which business activities can resume and that damaged infrastructure is repaired, are essential to regaining consumer and market confidence, and so recovery from a catastrophe. We will be discussing these issues in our sessions on sustainability at the 2018 FERMA Seminar on 8-9 October in Antwerp.
We see that public and private risk management are interconnected through the potential in catastrophes for power outages, disruption to transport networks, loss of road access and loss of water supply. These can cause extended business interruption which often costs business more than physical damage. The gap between the economic output and insurance coverage has potential consequences for supply chains and post-event demand for products and services.
This year the Global Risk Index has drawn attention to the severe potential economic impact of man-made events, especially a global rise in the threat from geopolitics and security catastrophes – civil and interstate conflicts and social unrest. This reflects combined high levels of political turbulence in developed economies and risks to global trade and security.
Natural catastrophes, especially from weather-related events in light of climate change, remain among the most severe threats to world cities, and the capacity for cyber attacks to cause severe economic damage is rising, but the Centre states that capabilities to protect against them have also been expanding. Such risks, however, do not occur in isolation. Many of them are interconnected, as the World Economic Forum regularly points out in its annual Global Risk Report, which can magnify the total impact.
The work by the Centre for Risk Studies and the World Economic Forum demonstrates that an enterprise risk management (ERM) approach is necessary for the sustainability of all organisations: public or private, small, medium or large. We also strongly believe that businesses, governments and insurers should collaborate to protect our critical infrastructures.