Crisis Management Shortfalls

Crisis Management Shortfalls- A Descent into Chaos

Definitions of risk and crisis management typically come from the insurance industry. It is known as the process of threats’ identification to individuals, organizations and nations, and the methods used to deal with these threats. This process, however, cannot be regarded as the responsibility of the insurance business only. Coping with risks is an inevitable aspect of living; and mitigating their impact is everyone’s business, from individuals and social groups to private sector players, lawmakers and, of course, governments.

The study of risk and crisis management arose after World War II. Originally, it was mainly associated with the use of insurance markets to safeguard individuals from

From 2005 to 2014, the world has witnessed a yearly average of 260 major natural catastrophes, with average annual economic losses of US$211 billion, insured losses of US$63 billion, and around 80,000 fatalities. Due to numerous interacting factors – namely globalization, climate change, populations’ growth, and urbanization – the influence of such disasters has been mounting alarmingly. In real numbers, annual average economic losses triggered by weather-related disasters have increased from US$55 billion in the 1980s to US$111 billion in the 2000s and US$180 billion thus far in the 2010s(1). This raises serious questions about the adequacy of our current crisis management systems and our resilience against such events. Long-term investments in disaster risk prevention have shown in many cases to provide a significant positive return when compared to amounts spent on recovery and rebuilding. Still, to date most crises have been managed on an ad hoc basis and attended to as and when they

Indisputably, the world is undergoing severe changes and as a consequence, the risks we traditionally faced are being replaced by far more complex and large-scale ones; ones that require important technical expertise combined with pioneering technology and processes to allow a quicker and more effective response. The challenge of emerging risks is looming before us: cyber risks, product liability, new technologies, economic risks, geopolitical risks, and other perhaps less tangible risks. As clearly stated by Christiana Figueres(2), “in an era of unprecedented risk there is no-one better able to help the world manage its risks than insurance”. The (re)insurance sector plays indeed a critical role in helping the world to assess, manage, and mitigate new and complex risks; in simpler terms, it can provide solutions to support the goals of building resilience. All that being said, it is time to lay the basis for a fruitful partnership between governmental institutions and insurance players to address current and emergent