The Role of Black Swans in Enterprise Risk Management

The increasing frequency and magnitude of black swan risks—unpredictable, rare events with high impact—over the past decade have attracted the attention of organizations, the public, regulators, legislators, academics, and rating agencies. This report provides preliminary benchmarking data on the extent to which organizations are identifying and assessing these risks in relation to others they face, and about how black swans fit into organizations’ developing enterprise risk management activities. Most organizations prepare and maintain a list of key risks generally based on quantitative or qualitative estimates of likelihood and consequence. Senior management is actively involved in identifying and assessing risk, but boards are much less engaged in this process. This report indicates that consideration of emerging and black swan risks will continue to grow within organizations’ ERM activities.