FERMA Report Warns Short-Term Thinking Exposes Firms to Future Risks

Short-term decision-making and cognitive bias are leaving companies and governments unprepared for the long-term effects of emerging global risks, according to the Federation of European Risk Management Associations' (FERMA's) inaugural NEXT (New EXposure Trends) Report. Developed by FERMA's Foresight Committee, the report urges organizations to adopt strategic foresight practices to improve resilience in the face of accelerating geopolitical, technological, human capital, and climate-related challenges. 

The report identifies systemic barriers within institutions that promote immediate priorities over long-term preparedness. These include market demands, regulatory constraints, and operational pressures, alongside behavioral biases such as optimism bias, status quo bias, and groupthink. These dynamics discourage forward-thinking and foster overconfidence in risk control, ultimately undermining proactive risk management. 

FERMA's analysis points to four key medium- to long-term risks likely to disrupt European businesses: geopolitical shifts, technological acceleration, human capital constraints, and climate change. It highlights how each of these forces could reshape industries through mechanisms such as unstable trade environments, job displacement driven by automation, talent shortages, and climate litigation. 

To address these exposures, the report recommends embedding strategic foresight into organizational risk frameworks. This includes methodologies like scenario planning, horizon scanning, and the futures wheel to help decision-makers visualize how emerging risks may interact over time. The report also emphasizes fostering a culture of long-term thinking, redefining performance metrics to prioritize resilience, and integrating predictive technologies, including artificial intelligence–based analytics. 

"Risk managers are fully aware of the limitations caused by short-term thinking and a narrow focus on known risks but often lack the capabilities or support needed to address emerging threats," Philippe Cotelle said. 

"By their nature, emerging risks provide sufficient time for companies to identify, monitor, and mitigate the associated threats," Charlotte Hedemark said. "However, short-termism and cognitive biases embedded in corporate and governmental decision-making mean that we remain unprepared for these high-probability, high-impact exposures." 

The report underscores the need for risk managers to be positioned as strategic leaders capable of navigating a volatile and interconnected risk landscape. It argues that a forward-looking, systemic approach is essential to adapt to the shifting realities of the global business environment.