Climate, conflict and security: companies must adapt to face this polycrisis

By Pierre du Rostu, CEO of AXA Digital Commercial Platform

The world is not short of crises. Wars, fires, floods, cyber-attacks: each is urgent, and each seems self-contained. But they’re not separate. Indeed, they link together in ways that make them harder to understand and harder to manage than if they were isolated. We live in what Edgar Morin and Anne Brigitte Kern first called a polycrisis: a web of connected risks that feed off each other and amplify their impact.

In some ways, this is intuitive. A warming climate means longer droughts, which means a greater chance of wildfires, which means damage to food supplies, pressured governments, and civil unrest. Pandemics erupt more easily in disrupted ecosystems and economic shocks unsettle democracies. Political upheaval fuels conflict, internal and external. This is the pattern of our time in history: one jolt rattling many systems, and each one making the next much worse.

This is increasingly the reality shaping boardroom discussions and shareholder meetings at some of the world’s largest companies. Supply chains snake across unstable regions. Assets sit in flood plains or fire zones. Data networks are probed daily by hostile actors: Marks & Spencer, high-street royalty in the United Kingdom, is still reeling from its latest cyber-breach. No company can treat these exposures in isolation; this is the crucial takeaway fact of the polycrisis. If leaders, attached to the old ways of doing things, continue to treat them as separate, they risk not only the health of their companies but also the communities that depend on them.

Insurers know this better than most. Our role has always been to boost resilience – to give people, companies and countries the self-confidence that is a precondition of taking risks. Safe in the knowledge that if disaster strikes, there is a safety net, people can speculate. But assessing each hazard, assigning a probability to it, and then paying out compensation should something happen just doesn’t work any more. The discrepancy between potential losses from an event and the actual amount of insurance coverage available to mitigate those losses is growing.

There is a solution. Technology now gives us tools that, even a decade ago, were inconceivable. Artificial intelligence can scan and interpret torrents of raw data in real time. Geospatial systems can track the spread of wildfires, the possibility of floods, or the build-up of troops along a border. Cyber platforms can detect vulnerabilities and train teams to repel intrusions before they become costly breaches. These systems exist and are already in use.

But if we can’t consider risks in isolation any longer, how should we approach the use of these tools? The truth is that too often they’re used independently of one another, often by independent teams. One monitors fire risk, another looks at geopolitical developments. One tracks cyber-threats. This is inadequate. And that’s why integration is the order of the day.

This is where insurers really have to lead. We see the whole landscape of risk as it appears across industries and across borders. By weaving together AI, geospatial, cyber tools, and human expertise, we can develop systems that mirror the complexity of that risk landscape, thereby avoiding an increasingly costly game of whack-a-mole, whereby we deal with one problem only to see another rise in its place. We provide instead a networked defence against networked threats.

That’s a technical change. But there’s a cultural side to this evolution too. Because the insurance industry is seen to deal in caution, and though the characterisation is somewhat unfair, there is enough truth to it to merit a rethink in how we look at risk. In the polycrisis era, there’s no time to wait and see what happens. We need to be early adopters of the tools available to us. We must be proactive, working with our clients using cutting-edge tools to predict disasters and, insofar as it is possible, prevent them from happening. This is what our clients want. More importantly, it’s what the risk landscape requires. Integrated, tech-driven risk management is the future of insurance. In truth, it’s the present.

Change, as the saying goes, is hard. But insurers should see it as more as a project of expansion or evolution, not upheaval. Insurers are tasked with preserving societal resilience. This enables that. Yes, it demands investment, upskilling, and the cultivation of new habits of mind. Collaboration, within the industry and with technology and specialist consulting firms, will also be needed. We’ll need to take an approach of continuous learning as well as continuous innovation to steal the march on the polycrisis. The cost of delay could be very high indeed.

And that’s because the polycrisis is not going away. We all have to adapt. The good news is that it is also manageable. The technology at our disposal improves every day. So we – both private companies and the insurers supporting them – can rise to the challenge. If we do, then we can protect people and livelihoods at a time when, for many, the world feels more volatile than it has for a very long time.