Glossary term
Emerging Risk
Subject: Risk Management, Risk Fundamentals and Frameworks
Also known as: Emerging threat
An emerging risk is a newly developing or changing threat whose causes, likelihood and impact are still poorly understood, so it cannot yet be measured with the usual tools.
Explanation
Past examples have included new technologies, shifts in climate, geopolitical change and new regulation. Because history offers little data, the usual method of counting past losses does not work. Firms instead scan for early signals, hold workshops with business experts, read outside research and write short scenarios of what might happen. Emerging risks sit on a watch list, often reviewed by the risk committee, and each gets an owner who reports whether it is growing, steady or fading. When enough evidence builds up, the item moves into the normal risk register and is assessed like any other. The term is easy to confuse with a new risk that is already understood, such as the risk of a new product line. An emerging risk is defined by uncertainty, not by recency. Waiting for loss data means acting after the cheap window for preparation has closed.
Example
A food manufacturer hears growing talk of a new crop disease in a region that supplies a key ingredient. Nobody can say how fast it will spread. The risk team adds the item to a watch list, names an owner, picks two indicators to track each quarter and reports to the risk committee. A year later enough data exists to move it onto the main risk register.
Not to be confused with
- Black Swan Event
- A black swan is a rare shock nobody anticipated; an emerging risk is spotted early but not yet understood.