@ the IERP® Global Conference, August 2023
Bobby Varanasi, CEO, of Matryzel Consulting Inc. covered three main areas in this presentation: global risks in a hyper-connected world; what to expect in the future; and building and maintaining resilience. Research has shown that in the next two years, the main environmental risks will stem from natural disasters and extreme weather events; failure to mitigate climate change; large-scale environmental damage incidents; failure to adapt to climate change; and natural resource crises. These risks are expected to escalate in the next ten years, with failure to mitigate climate change right at the top of the list. Additionally, the world will experience loss of biodiversity and ecosystems, as a result.
The cost of living is expected to dominate global risks in the next two years while climate action failure will dominate the next decade. Additionally, geopolitical fragmentation will drive geoeconomic warfare and heighten the risk of multi-domain conflicts. Stagnation, divergence and distress can be expected as one economic era ends. A major downside to technology is that it will exacerbate inequalities, and risks from cybersecurity will remain a constant concern. Climate mitigation and climate adaptation efforts will not be as fruitful as envisaged, and food, fuel and cost crises are expected to persist, impacting even more negatively on societal vulnerabilities.
Declining investments in human development may be one side effect of these complexities; this will further erode future resilience. As volatility in multiple domains grows in parallel, the risk of polycrises accelerates. “This list is a great starting point for getting up to date on what businesses will be facing in the next year,” Varanasi said. “That’s where you start. Then check back on the past year, and see if anything you have been doing is relevant…and get your plan up to date.” What are the consequences of situations like this? More importantly, how do organisations plan for these situations? “If you are the CEO or CFO, how will you plan for this?” he queried the audience.
“If things are progressively worsening, are we prepared for it? If we are not prepared for it, how can we prepare? The majority of institutions and organisations will experience constant volatility in the next few years.” With the issue of malicious activity growing in cyberspace, systems everywhere are becoming more vulnerable to increasingly aggressive and sophisticated attacks. Another technology risk is that data-collecting devices and data-dependent AI technologies could open pathways to new forms of control over individual autonomy. A key technology-driven risk is the risk to privacy. Larger data sets and more sophisticated analyses heighten the risk of misuse of personal information.
This could lead to individuals being exposed to the misuse of personal data by the public and private sectors. He also mentioned that freedom of movement could be at risk through commercialised privacy. Surveillance and monitoring of individuals, leveraged by insidious technology, could increase. Vulnerable segments of the population could find themselves being discriminated against. Collection, commercialisation and sharing of data is growing; users may inadvertently reveal more than they should, particularly when their information is aggregated with other data. “This is known as the Mosaic Effect, and could cause two more risks: re-identification and attribute disclosure,” he said.
“A lot of companies are using solutions which hide identification data. Re-identification is a big issue now. Photos can be hacked online so that they appear current.” But crime in the digital world is not necessarily an illegal act. “The individual has to be responsible for their actions,” he continued. “To do so, you have to know things that you may not know today. it is the job of risk professionals to understand the implications of these things – or at least, have access to people who know.” He urged users not to operate in siloes, as risks will continue to change, and knowledge of this has to be shared, to cope with the changes.
Additionally, there are social and political implications to hyperconnectivity, such as the proliferation of online crime erosion of privacy; and displacement in the labour market due to automation. Hyperconnected, digitised payments are reshaping global economies and financial institutions. The use of synthetic media is spreading, democratising the environment to a certain extent but making it more complex as well. Hyperconnected technologies also have an unprecedented environmental impact. Ethical implications to consider include truth, disinformation and propaganda; economic and asset inequalities; machine ethics and algorithmic biases; data control and monetisation; and implicit trust and user understanding, among others.
“One of the things that is happening today in many institutions in the Western world is that they are simplifying their product mix,” Varanasi said. “This is rather strange, considering that markets are becoming more sophisticated. There should be a demand for a variety of different products, but the exact opposite is happening. It’s not a matter of making money. The complexity of the ecosystem is just becoming unmanageable. A recalibration is happening – a fundamental reset.” Building and maintaining resilience means reinventing organisational capacities with science and technology. “When it comes to logistics, you are looking at rebalancing as well,” he said.
“Collaborate with organisations, create a partner model, and completely reimagine your risks. Start measuring the things that really matter.” Organisational leaders will have to grapple with strategic and technical questions and manage decision-making across multiple time horizons. He suggested five ways of building resilience: recalibrating anticipation in planning and decision-making; rebalancing efficiency and resilience of logistics; reinventing production through R&D and innovation; rethinking the boundaries of collaboration; and reimagining value when it comes to performance.
“To build resilience, your starting point has got to become zero again,” he said. “You cannot build on what you have because it can be moulded only to a certain extent. It has become brittle and will break but you need agility. You have to go back to basics; you will have an empty balance sheet. The right conditions and partnerships will then come into play.”
