Disruptive technology named as a top emerging risk

The Society of Actuaries and the Casualty Actuarial Society jointly published a full report of findings from the 17^th Annual Emerging Risk Survey along with results from a supplemental mid-year flash survey. The online questionnaires ask risk managers to rank current and emerging risks, and researchers track those rankings over time. Disruptive technology, climate change, war and cyber risks were some of the key emerging risks.

Top emerging risks

Top emerging risks chosen by risk managers in both surveys reflect recent events: deadly heatwaves and other climate events, continuing conflicts in Ukraine and the Middle East, as well as the advent of ChatGPT. Survey data collected in November 2023 has been supplemented with a May 2024 flash survey. In the November 2023 survey, climate change in particular held a dominant place in risk managers’ responses. It ranked first both as an emerging risk and as part of combination risks.

Responses between the two time periods have changed somewhat. For example, climate change as a top emerging risk decreased from number one in November 2023 to number four in May 2024, while disruptive technology has moved into the top spot. Some of this fluctuation may be the result of recency bias. The fall hurricane season may have impacted responses to the November 2023 survey, and continued development of generative artificial intelligence might be reflected in the responses to the mid-year flash survey.

For a more complete picture, the five emerging risks cited the most by surveyed risk managers include:

The biggest change from the previous emerging risk surveys is the inclusion of disruptive technology. It didn’t appear in the top five in 2022 but was ranked number 1 by May 2024. ChatGPT launched in November 2022, just as the 16^th Annual Emerging Risk Survey was closing. Since then, generative AI has received a lot of media attention, and there has been much public discussion about its benefits and threats.

“Identifying trends helps risk managers anticipate individual risks, analyze threat multipliers and plan for future scenarios,” said report author, Max Rudolph, FSA, CFA, MAAA, CERA. “The survey responses, especially the comments, provide a vehicle for risk managers to share innovative ways to analyze and manage risk.”

Top current concerns and stress testing

The 2024 mid-year flash survey included questions about current scenarios that most worried risk managers and about which risks they had stress tested. The table below ranks the scenarios giving respondents the most concern and the percentage that said those concerns had been stress tested:

The results exposed some imbalances. For example, stress testing exceeded stated concern for pandemics and liquidity risks. However, stress testing for other concerns fell short, such as for political extremes, data/cyber threats and Generative AI.

Top risk combinations

The 17^th Annual Survey conducted in November 2023 asked respondents about risk combinations, including risks that correlate with each other (for example, climate change impacting energy costs) and risk clusters, which do not necessarily correlate but happen in parallel or sequentially (such as earthquakes during a time of financial volatility). Respondents selected the following top five risk combinations:

1. 1. Climate change and natural disasters: severe weather
   2. Cyber/networks and disruptive technology
   3. Asset price shock and financial volatility
   4. Climate change and loss of freshwater services
   5. Terrorism and wars (including civil wars)

Survey details

Sponsored by the CAS and SOA, the 17^th Annual Emerging Risk Survey was conducted by Max J. Rudolph of Rudolph Financial Consulting LLC. The online survey included 133 participants. Eighty-one percent of respondents were based in North America, and additional responses came from risk managers in Europe, South America, Asia, Africa, the Middle East, and the Caribbean/Bermuda. The May 2024 flash survey was conducted online and included 164 participants.

Read the full survey report and the mid-year flash survey report for more findings and details, including an appendix with questions and comments from the risk manager respondents.