The final article in our series explores how businesses can change the way they view big risks and face the future with more confidence
At the beginning of the year Paul Middleton, managing director at Protiviti, stood in front of an audience who were eagerly awaiting his presentation. The business had just published its Top Global Risks of 2020 survey, with North Carolina State University, and the results laid bare what kept people awake at night.
The impact of regulatory change was at the top of the list, followed by economic conditions impacting growth, and succession planning. Competition with ‘born digital’ companies was still there, alongside ‘resistance to change’ in operations, and cyber security. But Paul wasn’t convinced these issues reflected the global reality.
“When I looked at the list, my gut instinct told me it didn’t tell the whole story,” he says. “So, I looked at the survey from the World Economic Forum, which talked about extreme weather events, climate change, famine, and weapons of mass destruction.” So, he said to the audience: “Where are those things on your list? You need to be bold and explore the world beyond your own time horizons.”
Back in January, the coronavirus pandemic was a footnote in the newspapers, and it wasn’t on the agenda of anyone that day. But in the weeks and months since March, it has changed people’s business models, accelerated digital change, and banks have lent billions to keep companies alive. Decades have happened in weeks and the global risk register will never look the same again.
Planning for a different future
According to futurist Rohit Talwar, who spoke on Protiviti’s Enterprise and Market Resilience Forum in July, we need to look at risk and the future in new ways. He advocates learning to plan for different scenarios and then acting accordingly. He describes working in the here and now, in the context of the bigger picture… be it the next pandemic, or the long-term influence of climate change.
“Governments and organisations weren’t fully prepared for the pandemic and didn’t necessarily have the skills to navigate through it,” he says. “The focus is now on a preparing for range of possible risks, including disruption to supply chains, which is related to climate change. Some companies are looking to develop more local sites, small footprint manufacturing, and new techniques, for example. That has a long-term impact, but it can be delivered in six months. Some countries have even got three-year plans to have local manufacturing for 80 per cent of what they buy.”
Rohit says that scenarios like these, in which companies are being forced to think differently about their resources and routes to market, can prompt real innovation. He shared the story of a business leader who described how their typical method of international expansion had changed. Previously, the business would put its money into buying assets and setting up manufacturing, but they have now flipped the model on its head. Because it needs to minimise its risk, the team is looking to crowd source investment from everyone in the new market who might buy their products. It’s a different model and will cost less to develop.
“We should be encouraging people to learn new skills and new ways of thinking to help navigate what’s coming,” he says. “That will bring new thinking into organisations and help people determine the difference between the tactics for the here and now and ideas for the longer term. Clearly, it’s hard to get shareholders to back you on a ten-year plan right now; but if you can demonstrate you are horizon scanning, it shows your investors, partners and staff you are preparing for a range of possibilities.”
Tools and techniques for opening minds
So, what can you do, to scan the future while not losing sight of the present?
The Copenhagen Institute for Futures Studies published a report in June 2020 called Pandemics: Existential risks and enablers of change. In 100 pages of editorial, the influential Danish think tank explored the past influence of pandemics on society and how they have shaped positive outcomes around global health.
It illustrated how the recovery could take place, depending on the development of a vaccine and demand from consumers: from the V-shaped bounce back, to the W-shaped double dip and the slower U-shaped path, it also included the gloomy ‘L’ where growth is depressed in the long term.
The report set these scenarios in the context of global mega trends, including how we behave in a ‘networked society’ and the extent to which we will become more or less egocentric; how technology is accelerating change; and how much democracy will be impacted by short-term measures to curb our freedoms, among a raft of other themes.
But importantly, it also suggested some things we can do to follow Rohit’s advice, and reimagine what might be possible in a changing world:
- Planning for optimisation means developing or improving your existing systems or practices. This could be your working from home arrangements, life during lockdown, or your company’s coronavirus strategy.
- Preparing for contingency means getting ready for something that might happen, like the second wave of a pandemic, or an environmental disaster. This isn’t necessarily about being the best, it’s just about being more prepared.
- Discovering novelty and emergence means thinking about a future that we might not be able to make sense of today. This involves asking ourselves, and each other, about the needs of the planet and future generations.
The report also suggests three building blocks to help us work in this way: develop the ability to tell stories, because they will help you make sense of the future; and draw on the intelligence, creativity and knowledge of others to map out new paths. Importantly, the ‘capacity to reframe’ also means that the way you imagine and make sense of the future, will greatly affect the future you imagine and develop.
Ultimately, the future is up to all of us.
Reimagining risk – towards a brighter future
If companies are going to navigate these risks and look at the future through some of these lenses, the learning will need to be applied across a range of scenarios and time horizons. The risks of lending to shore up businesses, for example, will be held alongside the impacts of climate change, the fate of another pandemic on workforce wellbeing, or an entire business model.
But while the challenges are many and varied there are also signs that businesses are alive to them. The past six months should help many to face the future with more confidence if the same thing happened again. Many people also believe the positives of collaboration, innovation and inclusion can be developed, which suggests we can come together over these bigger issues. Technology is also helping us to measure and understand the world in different ways.
“One of my clients has just been appointed the head of climate risk at a major bank,” says Paul. “He has asked me to look at things 30 years into the future.”
Climate risk is about looking at predictive analytics to understand what’s happening. We have never been so data rich and the information can be stitched together to look for correlations, causality, and dependencies. We can paint pictures that allow companies to stress test the things they do, he says.
“Let’s say a bank is lending to a fossil fuel business, which is causing climate impact,” adds Paul. “At the same time, it might have exposure to something on the coast of Barbados that is affected by a plant in Brazil pumping out oil.
“Why is it doing that?”
As the coronavirus pandemic has dominated the front pages, it has also illustrated how interconnected these global risks are, and how our lives will be impacted by them future.
Of course, there is a big job to do, but now is the time for long-term and coherent thinking, with leadership teams able to build consensus. Now is the time to be bold, to look at the horizon, while operating in the present day. We have the tools to help us do it, the stories are already being developed, and people are adapting to what lies ahead.
We also have each other.
“None of those bigger risks described by the World Economic Forum has gone away; they are still here,” says Paul.
“Now is the time to re-imagine the way we look at risk, to help reimagine the future.”
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