Emerging Risk Assessment: Latest Practice and Innovations

Enterprise risk management has moved from an event based view of risk to a holistic ,systems based approach. Risk systems that involve human interaction are classified and behave as complex adaptive systems and evolve over time. An understanding of the evolution of an enterprise’s risk system should reveal the nature of risk relatedness, future likely emergence of risks and be able to identify risk characteristics that are systemic to that specific enterprise. In order to operationalise such an approach, a methodology has been developed that draws on phylogenetic approaches that have been successfully developed for biological and language evolution studies. The technique and process provides an insight into the lineage, pace and impact of external conditions on the evolution of risks. It also provides a unique and rational classification of risk in an enterprise which can be used to optimize risk management resources. An example of a fictitious insurance company is used to illustrate the approach.