Early detection and management of emerging risks in the financial services industry: lessons from insurance businesses

Organizations interact with their environment at many different
levels. Therefore, surprising events or unanticipated trends in the
environment can quickly lead to negative implications for a company's financial outlook. "Emerging risks", which arise from changing environmental conditions, are especially relevant for the insurance industry. We define emerging risks as new or newly occurring risks or issues with an uncertain but high damage potential. The early detection, analysis, and evaluation of emerging risks allows insurers more time to make appropriate decisions concerning the management of these risks. With adequate early-warning systems, insurance companies can react faster and make better-informed decisions in response to trends and developments.
This paper describes the character of emerging risks and their
implications for the insurance industry. Based on a detailed analysis of four successful implementations of emerging risk management systems in the insurance industry, four dimensions - organization, processes, culture, and information technology - are introduced to describe important strategic implications of emerging risks for the insurance industry. The research presented is a unique study as it is the first examination of emerging risk management procedures in the insurance industry.