Economic pressures and climate change are two of the most significant risks on the minds of Canadian businesses today.
More than ever, risk managers must strike a balance between addressing short-term risk and creating lasting, long-term resilience.
“From our clients’ perspective, there is a greater focus on profitability today,” said Lexie Kindbom (pictured right), chief client officer at Marsh Canada.
“While ESG (environmental, social and governance) continues to be a focus, being able to maintain and grow profitability in today’s uncertain economic environment is top of mind.”
The rising cost of capital is proving to be a tremendous challenge for Canadian businesses, added Michael Lewis (pictured left), chief commercial officer at Marsh McLennan Canada.
The two leaders spoke to Insurance Business on the sidelines of the annual RIMS Canada Conference last month.
“Capital is scarce, and the capital our clients do have costs a lot of money,” Lewis said. “That has a huge impact for organizations, especially when they deploy that capital, whether it be on insurance, or risk mitigation and risk management, or even talent attraction and retention.”
At the same time, climate risks are weighing heavily on business leaders’ minds.
“Climate change consists of short-term risks, such as increased natural catastrophes and extreme weather events, and long-term risks, such as water scarcity and other biodiversity and ecosystem losses,” Lewis said.
The World Economic Forum’s (WEF) 2023 Global Risks Report, developed in collaboration with Marsh McLennan and Zurich Insurance Group, revealed that failure to mitigate climate change and failure to adapt to climate change were the two most significant risks facing businesses over the next 10 years.
“Business leaders are thinking how climate risks will impact their business in the next zero to 10 years and effectively deploying capital associated with mitigating that risk, whereas governments are looking at 20 or 30 years in advance,” Lewis said.
“That’s why they’re looking to invest in things like renewable energy that will have a long-term sustainable impact associated with climate.
“But the problem is that because of the cost-of-living crisis and inflation, the cost of doing those projects is two, three, or four times more than it was three years ago. There’s a push and pull dynamic.”
Ultimately, discussions about short- and long-term risks boil down to building organizational resiliency, the Marsh Canada leaders said.
Kindbom stressed the importance of marrying a company’s business objectives with the insurance and risk management strategy.
“The key thing that we’re talking with our clients about is resiliency and to truly understand and embed it within the client’s business strategy,” she said.
For Lewis, a resilient organization can look at the three key risk areas – asset risk, fiscal risk, and people risk – and find balance.
“It’s important that they’re not just focused on fiscal or asset risk, but they’re also looking after their people and their impact on the community,” he added.
“A resilient organization is one that has a well-integrated plan for the organization that encompasses risk transfer, risk management, and risk mitigation.
“But there also needs to be a balance between short- and long-term risks. If you’re only looking at the here and now, then you’re always going to be catching up with emerging risks.”
Do you agree with Marsh Canada’s view on building resilient organizations? Let us know your thoughts.
