Forum Institutional

Global Risks Report 2023: How organizations should respond

The newly published Global Risks Report 2023 reinforces the need to develop resilience to cyber risks, which evolve as rapidly as new technologies.

The newly published Global Risks Report 2023 reinforces the need to develop resilience to cyber risks, which evolve as rapidly as new technologies. Image: REUTERS/Pascal Rossignol

Carolina Klint
Chief Commercial Officer, Europe, Marsh McLennan
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  • Organizations should refocus their risk management and resilience approaches to simultaneously prevail over today’s crises and prepare for future risks.
  • According to the 2023 Global Risks Report, organizations should focus their resilience efforts on expediting green energy, climate and nature investments; improving employee health and well-being; and strengthening cyber resilience.
  • Developing a resilience mindset will help organizations develop strategies that position them well for longer-term risks and structural changes.

In 2022, the world confronted highly connected, complex and dynamic political, economic and societal risks, including recovery from the COVID-19 pandemic, the Russia-Ukraine conflict, high inflation rates and devastating climate change events. Disruptions to food, energy, cyber, supply chain, economic and global security challenged businesses’ near and long-term responses and strategies. Success in this turbulent year often hinged on adaptable and innovative risk management and resilience approaches.

Have you read?

Given the threats to national, business and personal security identified in the 2023 Global Risks Report, organizations should refocus their risk management and resilience approaches to simultaneously prevail over today’s crises and prepare for future risks. By thinking creatively and collaboratively about risk, businesses, governments, and societal stakeholders can develop effective structural and long-term resilience.

Top 10 short-term risks according to the Global Risks Report 2023
Top 10 short-term global risks. Image: Global Risks Report 2023

Global Risks Report 2023: A risk resilience mindset is the answer

Risk resilience at the executive, board and risk manager levels emphasizes proactively making better risk-based decisions, rather than reacting to crises or events. Critical questions for organizations in 2023 include:

  • How do we move beyond traditional risk management norms and tools, given today’s risk complexities and interactions?
  • What strategies will help us grapple with – and help our employees manage – the worst inflationary pressures in years?
  • How could escalating geopolitical tensions affect our business?

At its core, risk resilience should be actionable and may require an organization to expand its toolset, including reinforcing, augmenting and delivering new metrics. It should centre around a mindset that accounts for how risks interact, potentially “compounding” one another.

This mindset should guide the implementation of standard capabilities that address areas such as clients, supply chains, balance sheets and employees.

In 2023, three areas that organizations should consider focusing their resilience efforts on are:

  • expediting green energy, climate and nature investments;
  • improving employee health and well-being; and
  • strengthening cyber resilience.

Expediting green energy, climate and nature investments

The failure to mitigate climate change is viewed as a severe short-term threat for which organizations are least prepared.

This risk was exacerbated in 2022 by the temporary return to higher levels of fossil fuel dependence resulting from the Russia-Ukraine conflict and dozens of billion-dollar weather disasters that devastated many communities.

Six of the top 10 risks by severity in the long term relate to the environment and climate change.

Top 10 long-term risks according to the Global Risks Report 2023
Top 10 long-term global risks Image: Global Risks Report 2023

The compounding effect of other risks – including pandemic-related issues, the conflict in Europe, energy security threats and inflation and economic headwinds – may hinder climate mitigation progress in the near term and over the coming decade, leading to biodiversity loss and environmental breakdowns.

Expediting investments in both the green energy transition and adaptive risk mitigation strategies is essential for long-term climate resilience.

Despite increasing global investment in clean energy – expected to exceed $1.4 trillion by the end of 2022 – barriers remain to the transition to a net-zero economy. However, new approaches to risk modelling, assessment and allocation could help businesses, governments, and financial markets overcome these barriers and hasten the transition. These approaches may be applied to newer energy security and sustainability projects that take advantage of green incentives intended to stimulate economies.

Improving employee health and well-being

Keeping employees healthy amid the cost of living, infectious disease and political and environmental crises is crucial to long-term resilience. Companies that understand and address their employees’ workplace and personal needs are likely to fare better in the competition for talent and in their ability to respond effectively to a crisis.

In the face of the COVID-19 pandemic, organizations rapidly adapted to remote work and new health and safety protocols. These changes highlighted the importance of employee well-being in both physical and mental health. The pandemic also highlighted the importance of building blocks such as digital access to healthcare.

To promote and protect employees’ well-being and productivity, organizations should consider the value of flexible work arrangements; the availability of preventative health measures, such as vaccines and screening; employee mental health initiatives; and the development of an overall culture of health.

Taking advantage of transformative technology while maintaining secure cyber environments

Technology-driven innovation is vital to organizational success in today’s business landscape. As companies develop and deploy transformative technology – from blockchain to artificial intelligence (AI) to genetic engineering and beyond – they must protect their own intellectual property and processes, as well as sensitive data gathered from suppliers, employees and customers.

This includes developing resilience to cyber risks, which evolve as rapidly as new technologies. Among the top five risks for 2023, according to Global Risks Perception Survey respondents, is cyberattacks on critical infrastructure. In the longer term, widespread cybercrime and cyber insecurity is a top-10 risk. By 2025, the total cost of cybercrime will be around $10.5 trillion globally, according to Cybersecurity Ventures.

Global Risks Report 2023: The global risks landscape
The global risks landscape. Image: Global Risks Report 2023

Preparing for and effectively responding to cyber risk requires an enterprise approach as well as insight into extended supplier networks and a wide range of threat actors.

Law enforcement and governments also play a role in setting the cybersecurity policy agenda and in working with businesses, insurers and other stakeholders to identify threats, instil best practices and protect citizens and customers.

For bad actors, the ability to launch a cyberattack has become easier, with such tools as ransomware-as-a-service and more entry points and vulnerabilities. A resilience strategy that includes cybersecurity awareness, engagement and cooperation can provide better protection against active threats.

Organizations can take a step in the right direction by instituting best-practice cyber controls, which can mitigate cyber risks, improve cyber resilience and prepare for future disruptions.

How organizations can be successful

Resilience in today’s compounding risk and “polycrisis” environment requires dynamic measurements and actions.

This means tracking evolving global risk trends and strategic emerging threats to understand how they may impact people, supply chains and more. It means active engagement across the organization, not just by risk professionals, to prepare for major environmental, economic, industrial and social transformations. Furthermore, it must include measures across technology, finance, human resources, operational processes, stakeholders and more.

At its core, a resilience mindset employs scenario-based analysis and similar tools. It asks questions about risks that might disrupt strategy or external environmental issues, such as:

  • How is inflation affecting our employees and their families and our business relationships?
  • How will climate change affect our growth strategy, including what and where we source, and the new technologies we deploy?

A resilience mindset helps to develop strategies that position us well for longer-term risks and structural changes, so we can reduce uncertainties and make better decisions about where to invest limited resources.

Focusing on a resilience mindset will help businesses respond to today’s compounding risks and emerging polycrises with increased agility and create a more secure and sustainable world.

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