I read the 114 page WEF Global Risks Report https://bit.ly/2RwLeEp over the weekend, #dryjanuary #marathontraining #bluemonday. In this bleak season it seemed almost like fun.
For most companies the risks set out in the WEF report are interesting and can inform decision making but, in a practical sense they may not be the most worrying for the very human reason that, even if they crystallise and affect a company, management are unlikely to be blamed for external events that affect the whole market. There are a couple of caveats to this - management can’t be seen to have handled such events much worse than most of their competitors and, if your main competitors are based somewhere else, unaffected by this macro crisis, and it hits your company badly, you’ll probably still be punished by the market.
While a lot of the risks discussed in the WEF report have particular relevance for individual industries, for example those in the energy sector, I’d like to call out a few more general points for UK businesses.
It is worth noting that while the report has a section on short term risks, most of its attention is on the longer term big ticket items. However, even some of these have concrete impacts:
1. Cyber – Oh, you’d heard about this already? The sobering thing that comes out of the report is that the various risks that get lumped under the ‘cyber’ heading are probably even more serious and wide-ranging than you think – specifically: many more big data breaches in 2018, black hat AI capability increasing attack potency, new risks related to hardware weaknesses and indirect damage via attacks on utilities and infrastructure, including information infrastructure.
2. Political – Brexit has given us a painful insight as to how political risks can translate into real disruption at company level. Wider public discontent and feelings of powerlessness mean that this may just be the start, and further political changes will come with potentially negative effects for business, possibly including further migration restrictions and protectionism.
3. Trade wars – Beyond the macro level, these can bring supply chain issues, risks to staff posted abroad (ask Canada), inward investment reductions, digital data flow restrictions and, more obviously, tariffs and trade barriers, including disguised ones e.g. around health and safety.
4. People risk – Not ones were used to, about key people loss or staff behaviour, but something more subtle, well-characterised as needing remediation along the lines of mental health and safety rules and practices. The risk centres around heightened levels of anxiety, depression and stress. In the business context this comes from psychological stress arising from such things as ‘always on’ contactability, time pressures, job insecurity, loss of status and the workplace element of the widespread feeling of lack of control.
5. Climate – At this stage, the effects on most companies will relate more to government policy decisions (see this excellent Gillian Tett article in the FT @gilliantett https://on.ft.com/2W2EFIx)but there may also be supply chain issues and other nearer term impacts.
One final thing worth a look in the WEF report is the article toward the end from Andras Tilcksik and Chris Clearfield on ‘Managing in the Age of Meltdowns’, drawing on their book on the same topic. Some useful and practical advice on managing risks in complex systems.