The ongoing COVID-19 pandemic has illustrated how crucial it is for public sector entities to make use of the reinsurance industry’s advisory capabilities when evaluating risks and their potential impacts. This is particularly important for governments seeking to draft contingency and response plans in the face of a crisis. Guy Carpenter is well positioned to work with governments on creating frameworks to address nation-level risks including pandemic, as well as less pressing, but equally important risks that also overlap with the public sector, such as those from cyber or terror attacks.
The mission of government requires the materiality of risks to be examined through various lenses. Damage criteria for public sector risks can range from the physical suffering of individual citizens through to a decline in international influence; it may also include outcomes that undermine the fabric of society, impede economic activity, and erode environmental sustainability. These criteria and subcriteria implicitly reflect both the values of a country’s leadership and the nation’s strategic priorities, according to Marsh & McLennan Advantage’s Building National Resilience report.
Putting this framework into practice in risk assessment exercises is often challenging, given likely data shortages, analytical impediments, resource constraints, and conflicting perspectives. Analyses should calculate or assign probability to each reasonable worst-case scenario, but avoid hastily dismissing improbable (but still plausible) narratives as history provides evidence of many such shock events having actually come to pass. Impact assessment work must not only facilitate the scoring of each risk against the different subcriteria, but also permit scores to be aggregated across the framework. Weighting subcriteria or assigning materiality thresholds may feel invidious, but it’s usually preferable to omitting types of impact that may not be of top concern. The presence of these issues in the assessment framework can be useful for response planning at individual sectoral or local levels.
Assessments need to look through the behavior of the major risks to the vulnerability of what might be affected. This requires the mapping of critical infrastructure facilities and systems, understanding the dependencies between different infrastructure systems, and appreciating how failures might compromise vital services, economic activity, and the general functioning of society. This is as applicable to the capacity and preparedness of healthcare facilities to deal with major disease outbreaks as it is to large-scale power outages or a wide-ranging cyberattack.
Guy Carpenter actively works alongside Marsh & McLennan Advantage and other Marsh & McLennan businesses Marsh and Oliver Wyman to build a comprehensive, global understanding of public sector risks and how they can be addressed across different geographies.