Question asked by Frank Clark
AFERM Experts Say...
COVID-19 is a classic black swan event. Black swan events, as defined by Nassim Taleb, cannot be prevented and can be prepared for only by emphasizing agency antifragility. The COVID-19 pandemic is a realized issue with the emphasis on solving the immediate problems. However, an agency’s objectives and strategies my be influenced in the medium-to-long-term.
ERM processes should include recurring opportunities to survey current conditions and future assumptions and adjust objectives and strategies as appropriate. The COVID-19 pandemic is certainly one of those opportunities. Once adjustments are put into place, an agency can examine known uncertainties and their treatment plans. They can also explore new uncertainties that could impact the revised objectives and strategies. Risk appetite statements and thresholds should also be reviewed, as what was once considered to be important may not be as important now. Agencies should examine existing uncertainties in the light of new understanding. Impact assessments may change and may no longer meet the adjusted appetite thresholds. New uncertainties that emerge from the altered future landscape must be examined against the updated risk appetite.