Airlines are good at anticipating such risks as accidents but need to re-think their approach to risk management to deal with increasing exposure to "potentially game-changing risks" to their reputations, an aviation insurance expert warned this week.
Speaking in Hong Kong at an aviation insurance conference organized by his Willis Group insurance brokerage, Willis chief executive Joe Plumeri urged airlines to move beyond the traditional approach to risk management, which involves identifying threats and engineering redundant systems to counter them. This approach has been successful in making crashes rare events usually caused by human error, he said, but is not a good way to handle threats to reputation, which cannot typically be anticipated and whose effects are rapidly amplified in a world "hyperconnected" by social media.
Reputational risks such as skill shortages, currency or price fluctuations, or changing legislation are better dealt with by building resilience into a company, said Plumeri: "By having a risk management policy based solely on anticipation, a company will find that they are not fast or flexible enough to respond to a complex, interconnected and rapidly changing world.
"As much as any other industry, aviation needs to anticipate the worst, but to build resilience.
"The resilience approach acknowledges that the future is unpredictable and responds dynamically by having the right expertise and processes in place to make decentralised decisions and adjustments in real time. This builds organizations more capable of bouncing back from adversity."