PARTNER CONTENT
by ZURICH
This content was paid for and produced by Zurich in partnership with the Commercial Department of the Financial Times.

The Hyperconnectivity Of Opportunity And Risk

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“Managing risk and driving growth cannot be viewed as separate imperatives for business”, says Valerie Butt, Head of Commercial Insurance Customers and Distribution, Zurich, “but to optimise the upside of the major shifts shaping our world today, companies need the confidence of an enterprise-wide resilience framework.”

The Global Risks Report 2017 is a stark reminder of how broad and holistic any resilience framework needs to be, with uncertainty today challenging global and national governance, civil society, social protections and the planet. Further, shocks in any of these areas could trigger related shocks elsewhere.

“It is the interconnected and systemic nature of global risks that creates surprises when their impacts are felt not only locally but also globally. Against this background, it is important for businesses to understand the triggers, trends and scenarios to look out for, and to prepare for the possible consequences of any of those risks,” adds Butt.

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The Global Risks Report 2017

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Interestingly, if we extend the philosophy of risk interconnectedness to include a link between risk and opportunity, this same report could be read as a playbook for growth: most of the risks relate to profound and interconnected shifts that invite fresh thinking from the private sector about how to drive value with solutions. Four of the report’s key themes offer a useful lens through which to illustrate this.

Changing demographics

Ageing populations help explain why 13 healthcare firms feature on CB Insights’ ‘Unicorn List’ of start-ups worth more than $1bn – with six more predicted to join them soon. A recent KPMG report said while ageing is creating “alarming issues” for governments, the business community is achieving “win-wins” through innovative care services and new public-private collaborations. The global home healthcare sector is projected to be worth $300bn in 2020, up from $180bn in 2014.

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The Global Risks Report 2017 Executive Summary

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The Fourth Industrial Revolution (4IR)

The rapid convergence of technology and humanity that’s referred to as the Fourth Industrial Revolution is creating both risks and opportunities at a dizzying pace. Global spending on cybersecurity will total $1tn over the next five years, according to market intelligence firm Cybersecurity Ventures. But this is likely to present an opportunity for the companies spending as well as the providers. PwC’s Global State of Information Security Survey 2017 shows that businesses increasingly view information security as a way to achieve competitive advantage.

The possible loss of many jobs to automation has received great attention. But business leaders also grasp the potential for automation to make workers more productive. Nesta, the UK innovation charity, says nine in ten “highly creative” jobs – everything from architects to software developers – are at little or no risk. Instead, the boost to their productivity should benefit them and their employers.

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Global Risks Interconnections Map 2017

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Climate change

Eighty-three major companies including Apple, Facebook and BMW have committed to the goal of using 100% renewable electricity through the RE100 initiative. Businesses that traditionally faced high energy bills are now looking to profit by producing more energy than they consume. Ikea has already achieved that in the Nordic region and expects to do so before long in the US.

Civil society

Challenges to civic freedoms are rising globally. This may not immediately seem like a business concern but studies show a long-term link between democratic systems and increasing GDP per capita. There is also mounting evidence that diversity boosts the bottom line. Businesses have the chance to differentiate themselves through lobbying or resisting discriminatory local practices. A report by the Open for Business coalition, including Google and IBM, states unequivocally that anti-LGBT policies are bad for business and growth. They are also bad for risk management.

“Risk management works best when there are diverse and challenging perspectives in the boardroom”, says Valerie Butt. “Further, when a company’s approach to risk is defined at boardroom level – as part of strategic planning - business leaders find it easier to drive the right behaviours through all levels of the organisation”.

Ten years ago, we had IT departments and ‘the tech guy (or gal)’ who was charged with addressing the digital innovation that was taking place on the edge of large organisations. Now, as almost every large company looks like a technology company in some respects, this very notion seems incomprehensible. As a consequence, it is every business leader’s responsibility to define and understand the impact of technology on the business model and strategy. This understanding of cyber risk needs to be embedded in every aspect of a successful business.

Report: Global Risks Report 2017

Executive Summary: Global Risks Report 2017