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Why risk service professionals need to get to grips with environmental risk
While the growth in cybersecurity work may be generating the biggest headlines for risk consultants, there’s another big issue that is creeping up the corporate agenda and starting to create a pipeline of work for them: Environmental risk.
There are a few reasons why firms would be wise to build up their credentials in this space. Firstly, environmental risk is a pretty broad church, encompassing dealing with the physical risks arising from fire, flood, drought and other impacts of extreme weather conditions, to complying with emissions regulations, to ensuring that companies are protected from criticism of any failure to “do the right thing” when it comes to the environment and sustainability. While specialist providers have been helping clients deal with physical risk impacts for many years, climate change means that demand for these services is growing, opening up opportunities for new entrants. There’s even more of an open competitive field when it comes to other areas of environmental risk, which took a bit of a back seat in the aftermath of the financial crisis but are now high-priority issues thanks to global activism and increased regulation.
Like cybersecurity initiatives, environmental risk work also spans a lot of other risk topics and has the potential to cannibalise existing demand in a number of traditional risk service lines—in particular governance, operational risk, and responding to regulation. Firms failing to capitalise on the opportunity could see their market share take a hit.
What’s more, it’s an area that clients are prioritising when it comes to spend. A survey we carried out of senior risk buyers in the US revealed that just over half of organisations envisage hiring risk consultants to help them respond to macroeconomic risks—specifically demographic and climate change. While this is somewhat lower than the 68% of clients who plan to bring in risk professionals to help with cybersecurity issues, it still indicates that interest in this topic is growing apace. Things get even more interesting when we break our survey results down by size of organisation. Dealing with this type of macroeconomic risk is even higher up the agenda for large companies employing more than 5,000 people. Nearly 70% of this group of survey respondents see macroeconomic change as likely to drive consulting work—the same number as for cybersecurity.
All in all, those firms that are slow to set out their environmental risk stall could find themselves becoming less relevant to clients, losing out on competitors who are quicker to get their act together. Firms need to invest—and do so quickly—to create compelling propositions and build credentials that showcase their expertise in this increasingly high-profile area.