Predicting the future is the pursuit of circus clairvoyants and astrologers. It is also, of course, necessary to managing risk, and although the unexpected is always present, an attempt to view the trends and likely events is a worthwhile exercise – in part because it focuses the mind upon how prepared the organisation is for any
eventuality. As such we present our view of the forthcoming year, which we believe will see major shifts in risk management, based on combinations of technological, climate and social change.
As the curtain comes down on the twenty-first session of the Conference of the Parties (COP), climate change
dominates discussions on the economic and ecological future. Few dispute that whatever the impact of humans, the climate is changing, which brings with it a range of perils, from flood and food shortages to mass movement of people and conflict.
In addition to the direct human cost, natural disasters appear to have become more frequent, and the impact upon a global supply chain means that from a purely commercial perspective, a full view of the risks demands due diligence and ongoing management. From dispersal to insurance, traditional remedies have proved effective – if not always followed.
Meanwhile, technological progress has made its way into insurance in the form of parametric solutions. As we move from the physical to the virtual, in terms of what holds value, a major change has been in the rise of social media, allowing us to communicate directly to each other or broadcast to the world. As a result we have seen social power used to help in major disaster; appealing for help and funds, notifying those in danger or needing assistance, or more prosaically allowing smoother and more efficient transport of goods. As the sheer power of communication grows, so too will the need for these systems to translate into multiple languages to allow for the wider exchange of information.
In a joined world – where one complaint or comment can trigger a landslide of input and opinion, another major consideration will need to be around reputational risk.
Former BP CEO, Lord Browne, recently spoke of a ‘trust reservoir’ that companies need to fill and replenish
regularly so that any reputational damage can be mitigated, and not be terminal. He also made the point in his recent book Connect that whereas once certain sectors came under fire until another sector took on the mantle of the ‘bad guy’, now social media and the internet mean that all sectors are constantly under scrutiny.
We need only look over recent headlines following the VW scandal to see that trust in organisations can be
undermined in a moment. VW will face fines, law suits and costs of recall – but more than that the entire brand has been damaged. Latest figures show that the VW brand suffered a fall of over 30 per cent in the latest SMMT figures.
And of course, the biggest change, the one that will be a safe prediction, is that an organisation’s reputation will be affected not just from their image or products, but how they recover from supply chain issues (loss of productivity or welfare issues) or deal with ‘social’ related impacts.
The way in which an organisation acts now affects all its stakeholders; in a world where everyone is a stakeholder, and most have access to the internet.
This can be seen most notably in the case of environmental damage and the impact on reputation, for instance.
So, as technology creates new risks and new solutions, there is likely to be an ever greater need for risk experts to judge the circumstances, weigh the opportunities and discuss these with each other across ever greater distances.