emerging risks briefing
“Systemic risk” is a term that’s gaining traction in the nancial world,due to the nancial crisis and ever growing pressure on resources.WWF uses the phrase to describe interactions between ecological, political and economic systems.Globalisation and the interconnected nature of the world we live in means that changes and imbalances in regions,markets and the environment can often have repercussions for the economy and society as a whole.These include changes and direct effects on the industries and customers insured by RSA.
The global economy is built on resources provided by the environment such as minerals, water, energy and food.as populations grow there is a signicant danger that we will overexploit our natural resource reserves or pollute them through economic activity. Our actions already mean that more than 60% of our ecosystems are in decline(1).
companies need to start factoring this thinking into their business strategy and assess the links between their activities and the impact on ecosystems. by considering the wider interaction of the economy, environment and society companies can also gain commercial advantage as they develop strategies for sustainable operating practices and utilising alternative resources.
Through these briengs a risk model is being developed byWWf and rsa looking at the direct impact of environmental changes on business and how they can jeopardise economic activity. in addition, the model will look at changes to consumer behaviour, government regulation and economic approaches to remedy the impacts.
by taking a holistic view of these factors we will assess how best to advise customers to minimise risks to them and protect the environment we rely on for our livelihoods. each brieng will look at a subset of risks, building into a detailed risk framework over three years.
(1) Un millennium ecosystem assessment
Oliver Greeneld,Head of Sustainable Business and Economics,WWF-UK
“This is an ambitious project which will inform rsa’s capability to underwrite marine risks and our investment decisions.
“deteriorating ecological systems have the potential to accelerate political, social and economic changes in ways that cannot always be predicted from what’s happened in the past.This increases the importance of trying to investigate links between these areas.
“We expect this model to evolve as we establish a framework; the rst slice focusing on marine risks is covered in this paper. Our challenge will then be to look at links to other sectors such as energy, farming and transport.
“it’s critical for people in the insurance industry to consider risks more widely to their business as pressure on the environment grows and resulting feedbacks intensify.”
emerging risks briefing
OUr ecOlOgical sysTem system loadIng
2010 glObal pOpUlaTiOn 6.2 bIllIon
Supporting • Nutrient cycling • Soil formation • Flood defences Regulating • Climate regulation • Disease regulation • Nitrogen cycling • Carbon cycling Providing • Biodiversity • Food •Wood and fibre
Supporting • Flood defences Regulating • Carbon cycling Providing • Wood • Coal • Oil • Minerals
Supporting • Flood defences Regulating • Climate regulation • Disease regulation • Carbon cycling Providing •Wood and fibre • Aggregates
Supporting • Flood defences Regulating • Carbon cycling Providing •Wood and fibre • Aggregates • Minerals
RivERS system health