As the market looks to its recovery from COVID-19, Shyam Raikundalia, Head of Compliance says firms need to look to the future to meet the threat from emerging risks.

The recovery from the effects of COVID-19 for businesses across the insurance industry continues but for firms there’s now a need to ensure they’re paying due attention to emerging risks that will challenge their futures. In the past year, firms have been forced to undergo fundamental change in the way they operate and communicate with clients and their employees. Whilst the events of 2020 had forced firms to look to risks which threatened their day to day operation, they cannot afford to take a short term view. Whilst immediate risks are and remain important, regulators, clients and suppliers are taking the threat of emerging risks seriously.

Brexit remains a risk for the market and the firms which operate within it, as many companies still do not fully understand the threats they face from the UK’s departure from the European Union in areas such as reverse branching. Climate change has been in the headlines and in the build up to COP26 in Glasgow, there is likely to be more pressure on firms to publish and show evidence for their efforts to enhance their green credentials and lower their carbon footprint. The FCA is already keen to see the financial services sector play its part in the efforts to mitigate climate change, not only in the way they operate, but also for insurers, brokers and MGAs the risks they place or assume. It’s likely the FCA will look to other emerging risks areas in the coming months and is sure to issue new guidance on what they would like to see from firms they regulate.

The pandemic has also created new risks. A move to remote working looks set to be eased in the coming months as the UK’s vaccination programme continues. This is likely to create new risks for firms as they plot a return to work. Given the sudden shift to remote working, firms may find that on their return they have the office space but not the required amount of office equipment and technology to support a full return. Company management needs to be horizon scanning to identify these emerging risks, how they will impact their business and what action needs to be taken now to mitigate any future impact. Whilst larger firms will have specialist compliance employees that will be tasked with looking beyond today’s risks, it’s not the case for smaller brokers and MGAs who have been working to negotiate the pandemic and are still focused on the current threats, without the time or ability to scan the horizon.