Wimbledon Lessons on Risk Management

A threat will be assessed differently by every organization, João. On top of that, each organization has a different risk appetite and threshold. You also have to assess whether the monetary compensation for a realized risk makes sense.

All England Club got money that covered the loss of their revenue. (I'm sure a lot of other organizations will suffer from the cancellation.) But what about all other losses? If their supply chain is gone, what will they do next year? If the sports fans stop attending next year, how will this year's money help them?

It will be interesting to see what the All England Club's insurance premium will be for next year.

Thank you for sharing this news.
I am listening to the perspective of all the experts. COVID19 has definitely shaken the world big time, to keep the lesson learned in the forefront of our risk assessment attitude. Question is whether the business, government, and scientist will see the issue or risk with the same lense?

Global pandemic was predicted many years ago, but still, the business & politics did not give enough weightage to prepare itself ahead of time. Similarly, the case for climate change, even with so many markers across the globe because of climate change, all the nations are acting individually rather than seeing it as a global issue.

Coming back to your question the risk management will definitely be the core agenda for the coming years, but how it will impact the risk mitigation plan will depend on who has internalized the current issue to what extent.

It would be interesting to have been privy to the risk discussions on this, and the framing arguments.

My back of envelope calculations suggest 50-60 years (total) before the insurance benefit was outweighed by the cost (assuming the money was "banked"). Would a board approve having that much sitting in the bank (opportunity cost)? Is that part of the discussion? Kiron's idea of being responsive enough to invest in opportunities that benefit from the black elephant (gee - I like that image) was interesting.

What I also find interesting is that there was a certainty it would happen at some point (perhaps the black elephant in the corner getting ornery?) as opposed to black swan (no data to even recognise a risk). Is it that organisations that manage "discretionary" events are more attuned to this type of thing? Think religious organisations that insure against rain for a fund raising fete?

I am sure some organisations were/are struggling just to stay afloat from day to day, and longer term expensive risk management is just not an option (even big organisations like Virgin Australia).

What about other low probability / high impact risks like the meteor falling on London, the tsunami from north sea underwater slides or just plain consequences from global warming?

They might get some insurance money to cover lost income for some time. But there are indirect impacts on them from Corona, like the coming cultural changes in society, economic downfall, or just the compression in their industry of sports events.

If you have low probability / high impact risks which are prone to be mitigated by insurance, it is still possible that the risk event is lethal as consequences go beyond money.

Joao -

I believe that for a short while at least, risk management spending may increase across industries, but remember that this will also be at a time when companies are trying to recover financially, so they may not have sufficient reserves to do enough.

Where companies need to do a better job is:

1. Harvesting as many of these black elephant risks as possible during identification.
2. Before putting them on watchlists, identify the early warning signs where possible for these.
3. If those signs emerge, be willing to have an open conversation about how to respond to them.

For example, companies in North America could have monitored the news regarding the growing dangers of the pandemic in late December and early January and pre-emptively taken some steps to protect themselves in advance of government actions. Insurance is just one possible response. Others might have been proactively buying shares in companies likely to benefit from a pandemic such as Amazon or Shopify.

Kiron

You are wellcome. Just to comment, I am ATP/ITF/USPTA Professional Level I Tennis Coach including it I was a professional tennis player so I have to learn a lot about all related tournaments to get my certification (it is hard to get it because it is not enough had been a player. There is a lot to learn from years and take theorical practical exams including it things that are science related to tennis like physic). Then, I am a passionate about this type of topics. In the past when I started with it I interacted with people that were in charge to plan the tornaments like Winbledon, Rolland Garros, Australia, etc. At this time, between other things, there is not tv and the money price was close to "simbolic" so it was possible to talk with them. All this people lived the second world war, time that impacted in very different way to all this tournaments from things like Rolland Garros was a concentration camp to Wimbledon was bombed. This, adding the different way of thinking and behave between French people and British/Australian people, make perceived things in different ways. The same for the owners of the tournaments where some of them are private and others are belonging to government. Wimbledon has an insurance that covers not only pandemic. It covers other things mostly related to all players security and health no matter they are juniors for example. A different way to make things. No one are matter of judment in my personal opinion. Is the same than in companies and organizations. They can select to be ready for unpredictable and unplanned things (like those which did not were impacted because people have to work from home) or not.