Dave Ingram, a senior ERM consulting actuary at Actuarial Risk Management, reviews the key ERM developments of 2022 – and his thoughts on the outlook for inflation and emerging risks
What was the most positive ERM development of the year?
As we have been struggling to leave the pandemic, the idea of planning for risk is hitting home on some management teams that were less interested in it before. Support for risk management has increased, in some cases.
What has been the biggest ERM disappointment?
The lack of any kind of preparation or foresight for inflation is a pretty broad one. It is similar to the things people always say about traders in the stock market — none of them have lived through the last downturn so repeat mistakes from the past.
This time, with risk managers and people making a lot of the decisions, many of them had not lived through the last inflation spike, so they really weren't ready for it. I would have expected better preparation for this. But then again, many of us liked the story saying inflation was temporary. We were willing to go with that. What we should have been doing was reacting and saying, 'what if it isn't?' I think there has been some confirmation bias involved there.
And how long do you think inflation is going to continue?
I think a spike in prices will take a while to work its way through. If people's expectation is that inflation will go back under 2% and everything will be hunky dory — if that's the expectation, that will be a problem. I don't think it's going to get down really quickly. It could take several years.
What emerging risks are you most concerned about for next year?
The one risk is of some kind of major destabilisation in international markets. That is a big possibility. For one, China's economy could destabilise in some significant way and if that is going to happen that is huge. It would overwhelm everything else we usually worry about.
Are more risk managers looking at macropolitical issues?
In a survey we did we found non-life companies do, but a lot of life companies don't seem to do much of it. For example, the knock-on effect of macro risk with supply chains and the connection with manufacturing companies. Insurers are investing in all those companies even if they aren't insuring them. It is reasonable for life insurers to pay attention to this.
Lastly, what is your favourite part of the Christmas holiday season?
Getting together with family. The number of family events in the last year after coming out of Covid and being able to see each other — it seems like such a positive thing to just share some time together.