Pandemic demonstrates multi-class connected risk causality

The Covid-19 pandemic represents the perfect connected risk for global trade, as evidenced by the travails of the airline and travel sectors and the knock-on effects for the underlying manufacturing, entertainment and other supporting industries.

Pandemic connected risk

Russell defines connected risk as the systemic impact on commercial organisations, their partners, suppliers and clients from cumulative and cascading financial, operational and reputational fluctuations and uncertainties.

In the case of the pandemic, we can see its impact not just on travel and hospitality, but also on other industries such as aviation, which is interconnected with energy (oil prices), commodities trading (aluminium manufacturing), hotels, restaurants, tourism and travel, and in-flight entertainment.

These sectors might differ, but they are all impacted similarly by the connected risk posed by the pandemic. Now we see that industries are all connected, and that a connected risk event can deliver an economic shock which cascades across industries on the down-cycle and can also be observed during recovery on the up-cycle. This requires scenario analysis using data at an integrated, multi-sector, global level.

We can see the connections and causality, which is now contributing to the formation of a new era of business transformation with new approaches required to manage the risk and opportunities. This article is a summary of an in-depth report (download here), which shows three things.

1. We have shown that connected risk exists. The pandemic is a form of connected risk.

2. The dominant effect of pandemic connected risk is the causality across multiple sectors.

3. Multiple sectors can impact one sector while one sector can impact multiple sectors.

We took a particularly close look at aviation and travel, and the tightly interwoven supply chain ecosystem that connects them.

An integrated approach to data gathering and scenario-level analysis is the solution for strategic

risk managers, (re)insurers and investors that need to act fast. In my next #ReinsuranceMonth weekly article I will look at how the Covid-19 pandemic affected the aviation sector.

Insight, analysis, action!

Russell Group’s approach to risk modelling enables reinsurers to make better, more informed decisions. We harness industry-leading insights to power our software platform, ALPS. Analyses from these insights enable our consultants to further add value for our clients.

This cycle of support works together to provide a constant view of connected risk exposure across multiple sectors in the ever-changing landscape of the global economy. And being industry agnostic, our services support corporates, insurance and reinsurance companies across multiple sectors.

Insight: We have created a comprehensive and continuous dataset, Russell Universe. This data is consolidated from selected leading providers to give you unique exposure insights across multiple industries.

Analysis: Our integrated exposure insights can be viewed and continually assessed with our software platform, ALPS. The ALPS platform allows you to carry out risk and exposure modelling to see where your business may be vulnerable, or even where opportunities may arise, in your chosen market(s).

Action: Russell Consulting brings together exposure data, innovation and industry expertise to enable new risk transfer opportunities in today’s connected world.