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Risky Business – captains of industry assess key future global risks to business

This blog was written by Bobby Reddy, University Lecturer in Corporate Law at University of Cambridge and fellow of Churchill College, Cambridge.

On Tuesday, Tomorrow’s Company held a roundtable discussion (the “Roundtable”) on the World Economic Forum’s Global Risks Report 2015<1> (the “Risks Report”). John Scott of Zurich Global Corporate hosted, with the ensuing discussion revolving around a wide variety of concerns facing the business community in the near and distant future, ranging from social instability, urbanization and unemployment to climate change and cybersecurity. It was noted that for the first time in 10 years, survey participants perceived that the most impactful global risks in the short and long term were not economic in nature<2> - water shortage was envisaged to be the most impactful threat, closely followed by infectious disease and weapons of mass destruction. Social instability featured highly as a concern amongst survey participants. The Roundtable similarly focused on social instability, not just as an issue in and of itself, but also in terms of profound social instability and inequality being underlying causes, or consequences, of other risk factors.   A recurrent theme was the paradox of globalisation of the macroeconomic world versus greater insularity in the political sphere. Governmental institutions were showing less enthusiasm to engage on a global basis, with, for instance, global issues and risks being almost completely absent from political discourse in connection with the upcoming UK elections. This was a response to what seemed to be a negative reaction by the general public in the UK and Europe to globalisation and inequality, resulting in the collapse of trust not just in business organisations, but also in the authorities, as seen by a movement in several European jurisdictions to more populist regimes and a greater emphasis on public referenda. Global risk at a business level endears itself to three types of responses: firstly, risk resilience, being how firms bulletproof themselves against those risks. Secondly, risk competitiveness, being how firms can exploit risks to garner a competitive advantage; and finally, risk mitigation, being how firms can target the underlying problems that create the risks. In relation to the first two aspects, it was discussed that the formulation of flexibility in approach was most conducive to success. However, in relation to risk mitigation, the Roundtable reflected on a deficit in accountability and responsibility in facing up to such difficulties. There was a consensus that there was a need to generate a culture of responsibility – as the public sector has turned towards austerity budgets and more insular attitudes, the responsibility to tackle many global problems has shifted from the public to the private sector. The Roundtable discussed how in the UK there was a shortfall in long term thinking. That said, there was also an acceptance that in many cases it was difficult to discern what risks would be material in 10 years’ time in contrast to material risks in the here and now. The launch of the Tomorrow’s Risk Leadership report on 5 May, 2015 will shine a spotlight on this multifaceted aspect of risk management. So, how best to instil a culture of responsibility? A progressive notion was that communications with other stakeholders need to become two-way and more candid, not glossing over the very risk factors that can affect business; the current generation demands this form of honest dialogue through social media, and it is no longer sufficient for companies to merely rely upon generic one-way communiqués. Additionally, the value of local solutions as opposed to centralised global initiatives was commended, and there was a degree of skepticism as to the efficacy of international Bretton Woods-style institutions and accords in the current global environment. An illustration put forth was the use of social media on the ground in Nigeria to inform on Ebola and how to avoid its spread. On the other hand, the threat of cybersecurity breaches was posited to be a major future concern, and, surely, cybersecurity is an issue that requires a coordinated global response? It is essential that in the coming years, companies engage in building trust into their business models, and key will be strong collaboration, not just between the private and public sector but also between individual, often competitive, businesses. Taking responsibility to evolve from risk resiliency to risk mitigation is a further vital ingredient in building such trust. Previously, governments and NGOs have taken the lead in establishing partnerships to face down these challenges; now, in an uncertain world, business needs to be a stronger force in driving the long-term thinking that risk mitigation demands. <1> Global Risks 2015, 10th Edition, published by the World Economic Forum <2> In a survey of 896 leaders in government, business, academia, and non-governmental and international organisations

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