Reflections of Emerging Risk Management, February 2020.
The Risk Reflection this time is about the 2020 Global Risk Landscape, reported by the World Economic Forum (WEF). This report, shows a complete global perspective to start a Risk Management Analysis in Today´s world, classified in five different groups risks:
- Economic risks
- Environmental risks
- Geopolitical risks
- Societal risks
- Technological risks.
Obviously, those five kinds of risks impact directly Governments, Companies and People, so, it is very important to bear in mind the likelihood, negative impact and the co-relationship among those kinds of risks when you start a Risk Management Process.
For this 2020, the Following Top Ten Global Risks were identified and reported, according to the survey’s analysis. Which of them have been included in your company Risk Assessment Process? Please, note that Cyberattacks to Infrastructure is ranked in 5th place, and Cyberattacks to theft of money or data is ranked in 8th place. Unfortunately, most of the Companies only include Theft in their own risk analysis. .
The following diagram reported by the WEF shows the complicated relationship among many risks faced Today. This is indeed, an scary and complex scenario. Have you considered those risks, and their relationships in your Risk Identification analysis?
From this interesting view with a holistic approach, we reach some very interesting findings. On the one hand, the Climate change is, the worst risk source; but on the other hand, the more digitized and dynamic the world and businesses become, the more emerging risks grow. Then, Human beings have created two significant risk sources, multiplying Climate change and Technological related Risks, and they have multiplied the risks number, likelihood and negative impact.
In addition to the above-mentioned risks, the Global Economy is threatened by the USA – China confrontation, domestic political polarization in many countries, and the Cybercrime growing very fast. This means that, we live in a very different world compared with 1990 and 2000 decades, but few People and Business understand this Global Perspective.
In order to make this scary scenario a more applicable tool, we can use the following figure, that figure shows a more familiar view in the business risk management practice: The Impact and Likelihood of the main Risks reported by the WEF for 2020, and should be included as a starting point of the Companies Risk Identification to promote an Effective Risk Management Process.
The worst negative impact and the highest probability risks are clearly related to the Climate Change, and the ultimately impact is the Human Beings disappearance; beyond the merely economic impact for Businesses and Governments. There is a lot under exposure. Below those risks, we can see more familiar risks in terms of usual business risk management processes. Cyberattacks, Data Fraud, Theft or a Data Infrastructure Breakdown are commonly considered in risk management business analysis. Here, we have an important reflection: The common factors among these kinds of risks are their fast evolution and relationship among them. As a consequence, new and different negative impacts are brought to the risk equation. It seems to be a factory of Emerging Risks, and in front of this scary scenario, Doing Nothing is not an option.
We should start by being aware of this new world risks complexity. Then, promote a more holistic perspective of the relationship among the global risk/impacts with the risks related to our nearest environment, including our businesses, communities, countries and even families.
Then, we should promote awareness in regard this global risk complexity and have a more conscious participation to find and implement actions to prevent or mitigate these risks. We should do this at home, in our communities and our jobs or businesses. This could be a more practical risk management approach compared with the common risk management approach used companies.
This is all I have for Today, but let’s keep talking about these global risks and other in terms of Risk Management.
Business Expansion Consultancy Partners S.C.
