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Sherrie Hyde, Risk Manager, Lutherwood
This is the first article in a 3-part series on how risk management leaders can enhance their organization's risk intelligence by leveraging The Global Risks Report 2017 - 12th edition released by the World Economic Forum. Each article in the series focuses on how to bridge one of these common gaps in ERM performance identified in the Risk Wise Risk Intelligence Benchmarking Survey:
(N.B. A more fulsome analysis of the Risk Wise Risk Intelligence Benchmarking Survey is forthcoming. In the meantime, this 3-part series provides a sneak-peak of a few survey findings on a topic where a majority of organizations have significant opportunities to improve.)
Before I share my thoughts on how to leverage The Global Risks Report, let me share an overview of the document. It includes:
The commentary in this year's The Global Risks Report is outstanding and well worth the read. It provides a thoughtful, insightful analysis of how key trends in social, economic, technological and environmental factors are creating risks to populations globally. It also suggests practical options that leaders and organizations in the public and private sectors can employ to maximize the opportunities and minimize the threats associated with these looming global risks.
To identify looming risks to an organization's objectives requires an understanding of the trends and shifts in the business environment that could potentially disrupt the business. Yet, as illustrated in Figure 1, our Risk Intelligence Benchmarking Study indicates that 55% of organizations don't adequately maintain and consult a listing of key trends in their business environment, and only 3% reported advanced practices in this area.
Figure 1: Result of question #9 of the Risk Wise Risk Intelligence Benchmarking survey
The danger of ignoring trends as part of the context for risk identification is twofold:
Here are two tips to leverage your understanding of the trends in your business environment to enhance risk intelligence.
If you don't have a list of the key trends in your business environment, start one. If your organization does strategic planning, you won't have to begin the list from scratch. The inventory of trends that resulted from the environmental scan that was done for your organization's latest strategic planning exercise can serve as an excellent starting point.
Whether you start with the output of your organization's environmental scan or a blank sheet of paper, you'll want to:
Table 1: Trends identified in The Global Risks Report 2017 (A global “trend” is defined as a long-term pattern that is currently evolving and that could contribute to amplifying global risks and/or altering the relationship between them.)
Trend | Description |
Ageing population | Ageing populations in developed and developing countries driven by declining fertility and decrease of middle- and old-age mortality |
Changing landscape of international governance | Changing landscape of global or regional institutions (e.g. UN, IMF, NATO, etc.), agreements or networks |
Changing climate | Change of climate, which is attributed directly or indirectly to human activity, that alters the composition of the global atmosphere, in addition to natural climate variability |
Degrading environment | Deterioration in the quality of air, soil and water from ambient concentrations of pollutants and other activities and processes |
Growing middle class in emerging economies | Growing share of population reaching middle-class income levels in emerging economies |
Increasing national sentiment | Increasing national sentiment among populations and political leaders affecting countries’ national and international political and economic positions |
Increasing polarization of societies | Inability to reach agreement on key issues within countries because of diverging or extreme values, political or religious views |
Rising chronic diseases | Increasing rates of non-communicable diseases, also known as “chronic diseases”, leading to rising costs of long-term treatment and threatening recent societal gains in life expectancy and quality |
Rising cyber dependency | Rise of cyber dependency due to increasing digital interconnection of people, things and organizations |
Rising geographic mobility | Increasing mobility of people and things due to quicker and better-performing means of transport and lowered regulatory barriers |
Rising income and wealth disparity | Increasing socioeconomic gap between rich and poor in major countries or regions |
Shifting power | Shifting power from state to non-state actors and individuals, from global to regional levels, and from developed to emerging market and developing economies |
Rising urbanization | Rising number of people living in urban areas resulting in physical growth of cities |
Two simple ways to apply the information in your list of trends to enhance your risk intelligence include:
Identifying looming risks to an organization's objectives requires an understanding of the trends and shifts in the business environment that could potentially disrupt the business. To explore additional techniques for strengthening your organization's capabilities for identifying and monitoring trends in your business environment, contact Diana Del Bel Belluz at Diana.Belluz @ riskwise.ca or (416) 214-7598.
In the next two installments of this series I provide tips on how to bridge two additional common gaps in ERM performance identified in the Risk Wise Risk Intelligence Benchmarking Survey:
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Sherrie Hyde, Risk Manager, Lutherwood
Moving Beyond the Risk Map to Operational Vigilance
Read more about the Risk Management Made Simple Advisory.
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Director, Risk
Kinross Gold Corporation
The Neuroscience of Enterprise Risk Management (written by Diana Del Bel Belluz of Risk Wise) expores findings from the field of neuroscience and shares practical tips on how to apply them to enhance individuals' risk management thinking and implement brain-friendly ERM practices in organizations.
The article was published by The Conference Board of Canada in the Autumn 2017 issue of the journal Risk Watch.