This can arise from simply not knowing what we don’t know as the world rapidly changes around us; from changing paths of risk due to more complex multidimensional networks; or from developments (such as social media) that amplify the probability and impact of risk events. This in turn calls for new ways of managing and thinking about risk. For many organisations, this represents a fundamental shift in current approaches to risk management. Reflecting on our own work in the financial sector and within the Bank’s own organisation, risk management practices would appear to be at an inflection point. More traditional approaches to risk management have come under increasing pressure for their tendency to overcompensate for risk-taking, resulting in missed opportunities that are likely to cost businesses, and society at large, much more today than before. On the other hand, managing risks by instinct or intuition can produce massive payoffs. But I suspect none of us in this room would advocate abandoning the principles, disciplines and methods of risk management that help leaders make sound decisions, particularly when those decisions can have significant negative externalities. So, where to from here? Clearly, risk and insurance management must innovate and adapt ahead of growing, new and evolving business risks. Five years ago, Steve Culp, a Senior Managing Director at Accenture, told Forbes that innovation and risk management are partners, not adversaries – “When properly fused, the two disciplines can help organisations pursue opportunities that a risk-averse culture might leave on the cutting room floor”.

This is not only misguided; it misses a valuable opportunity for organisations to design operations in a way that would enhance an organisation’s ability to reinvent itself as circumstances change, and achieve wider options for recovery in a business disruption scenario. At its most basic level, building resilience is about helping organisations better understand their operational and financial interdependencies and how this can affect their ability to recover and respond to disruption and change. This not only assures an organisation’s own survival, but enhances its prospects for creating value. Development priorities for insurance and takaful In speaking on innovative risk management, I would be remiss not to touch on the Bank’s development priorities in the Malaysian insurance and takaful sector to support risk management by businesses. Let me mention some of the ongoing initiatives that are relevant to those in this 4/5  BIS central bankers' speeches  room today: · We are raising professional standards for insurance brokers to improve the quality of advice and risk information provided to risk and insurance managers; · We are reviewing existing industry arrangements to further develop domestic underwriting capacity for large and specialised risks; · We are progressing a review of capital requirements to further strengthen the resilience of insurers and takaful operators to support more complex and diverse risks; and · We will continue to facilitate access to the domestic insurance market by strong global insurers that can bring new and innovative risk solutions to meet the needs of Malaysian businesses and reduce insurance outflows.