Emerging risks are potential threats evolving in nature, have not yet fully developed, or are not well understood. These could stem from new technologies, geopolitical shifts, or novel market trends. The key challenge with emerging risks lies in their unpredictability and the limited historical data available, which makes them tricky to identify and measure.

Keep reading to find out who identifies these, how to manage emerging risks, and my favourite - when does an emerging risk stop and become a “real” risk.

Identifying Emerging Risks: A Dual Approach

1. Top-Down Insight: Often, it is a Board member who initiates discussions on emerging risks. Board members can act as early warning leveraging insights from multiple board positions or years of industry experience. This top-down inquiry generally prompts this cascade of actions:

   • Board Inquiry: "What are we doing about this potential risk?"

   • Executive Response: "I'll look into it and revert."

   • Senior Leadership Action: Scramble to assess and respond to the inquiry.

   Don’t worry if this is familiar, we can fix this.

2. Bottom-Up Vigilance: Frontline workers and their managers are equally crucial in spotting emerging risks. However, their insights often go unnoticed without proper channels to capture and escalate these observations. Effective bottom-up strategies involve senior leaders actively pulling information, completing their own horizon scanning and subsequently feeding these higher.

Don’t reinvent the wheel

1. Leverage Existing Governance Structures: Integrate emerging risk discussions into your existing risk governance frameworks. This ensures information flows seamlessly up to the Board, ideally before they need to inquire.

2. Operational Rhythms and Business Cadence: Utilise the existing meetings at all levels—weekly, monthly, quarterly—to ask, "Are we seeing any emerging risks?" Keep the topic regularly on the agenda and ensure there is no delay in addressing potential issues. Don’t create a separate meeting to discuss emerging risks.

Strategies for Managing Emerging Risks

1. Immediate Action: If required don’t wait for formal meetings; act swiftly as soon as risks are identified.

2. Designate Ownership: Assign a specific individual as the emerging risk owner to ensure accountability and focused attention.

3. Stay Informed: Emerging risk owners should continuously monitor industry trends and predictions using AI analytics and big data.

4. Scenario Planning: Engage scenario analysis to anticipate potential impacts and develop strategic responses.

5. Technological Aid: Use predictive analytics and monitoring tools to detect early warning signs, particularly useful for pre-empting regulatory risks.

When Does an Emerging Risk Become a “Real” Risk?

The transition from an emerging risk to a “real” risk occurs once it is being actively managed with controls. An emerging risk moves from the ‘emerging risk register’ to the ‘risk register’ when mitigation plans such as controls are established and documented. Make sure this risk is now included in your risk profile.

Pro tip: If a risk is in your risk profile it is not an emerging risk.

Conclusion

By managing emerging risks proactively, your organisation not only protects itself against potential threats but can respond before competitors and give you a strategic edge. Make sure you are actively managing emerging risks and have policies and processes established to support.

Closing Thoughts

I encourage you to reflect on how your organisation approaches emerging risks and if you have a formalised approach and an ability to capture information from all levels of the organisation. You don’t just ‘wing’ emerging risks.

Now, what would you do differently and what help do you need to get there?