through the looking glass - facing up to...
TRANSCRIPT
Through the looking glass - facing up to risk
19th July 2012 Joseph White Senior Strategic Risk Consultant Zurich
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Agenda
Global risks 1
Three case studies 2
Housing risk report 3
Risk appetite 4
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Global Risk report
Presented at the World Economic Forum in January
470 contributors
Looking at 50 risks, but in particular, their interconnectivity
Five categories:
Economic
Environmental Geopolitical
Societal Technological
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Global risks landscape 2012
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So which were the big global risks?
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Understanding individual risks is not enough World Economic Forum Risks Interconnection Map (RIM) 2011
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Agenda
Global risks 1
Three case studies 2
Housing risk report 3
Risk appetite 4
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Three risk cases
Seeds of dystopia
How safe are our safeguards?
Dark side of connectivity
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Case 1: Seeds of dystopia
• Bulging populations of young people with few prospects • Growing numbers of retirees depending on debt-saddled states
(stoking fiscal imbalances) • Expanding gap between rich and poor fuels resentment worldwide • These trends risk undoing the progress that globalization has
brought
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Population demographics in 2025
Least developed countries
Emerging countries
Developed countries
100 years
50 years
0 years
Source: Data from World Population Prospects: 2010 Revision. New York: United Nations Department of Economic and Social Affairs, 2010
Retirement age (65)
Enter workforce (20)
Number of people age 65+ per every 100 working age individuals 8.0 14.7 36.3
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Three risk cases
Seeds of dystopia
How safe are our safeguards?
Dark side of connectivity
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Case 2: How safe are our safeguards?
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Inadequate safeguards can harm global stability instead of protecting it
• Too slow to respond to the accelerating pace of global changes
• Over-complicated or inadequate
• Narrow focus on individual sectors or actions
• Fragmented
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Three risk cases
Seeds of dystopia
How safe are our safeguards?
Dark side of connectivity
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Case 3: Dark side of connectivity
• Our daily lives are almost entirely dependent on connected online systems, making us susceptible to malicious individuals, institutions and nations that increasingly have the ability to unleash devastating cyber attacks remotely and anonymously
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Interconnected risks require connected solutions
• The Arab Spring demonstrated the power of interconnected communications services to drive personal freedom, yet the same technology facilitated riots in London. Governments, societies and businesses need to better understand the interconnectivity of risk in today’s technologies if we are truly to reap the benefits they offer
• Internet and technology risks are complex and evolving rapidly
• The interplay between the digital and physical worlds is vastly more complex than in the past
• Managing risk effectively requires a view over the whole system
• History teaches that systemic risk can be catastrophic, coordination and collaboration is critical
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Agenda
Global risks 1
Three case studies 2
Housing risk report 3
Risk appetite 4
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What does the housing sector landscape look like in terms of risk?
• Economic climate / Financial • Regulation • Governance failure • New legislation e.g. welfare reform • Data loss / information management • Supply chain management / partnership • Short term decision making • Organisational Capacity / workforce planning • Incident management e.g. fire / explosion • Demographics / Community cohesion • Climate change • Reputation damage
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Agenda
Global risks 1
Three case studies 2
Housing risk report 3
Risk appetite 4
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Definitions – Risk appetite v Risk tolerance
Risk Appetite • How much risk an organisation
wants / willing to take?
Risk Tolerance • How much risk an organisation
can bear?
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Defining your risk appetite helps...
• To ensure the organisation is only taking a level of risk – and type of risk it is comfortable with
• To ensure the risks you are exposed to are commensurate to the opportunity or reward to be gained
• To provide a framework for decision making
• Staff to make judgments about which risks are acceptable & which are
not
• To ensure your response to risk is proportionate
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Risk tolerance
• Setting a boundary on a risk matrix
• Statements
• Performance Indicators
Broad ways to express your risk appetite:
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The following should be remembered:
• Appetite should align with overall organisational strategy
• Stakeholders should be consulted when defining risk appetite
• Organisation’s risk appetite must be reflected in the decision making framework
• Communication is key
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Key messages:
• Lights on ‘full beam’ for future risks
• Consider the connectivity of key risk themes, and mitigation actions
• Understand your risk appetite and how that supports your corporate priorities
• Manage those risks in line with your risk appetite and supporting risk management framework
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Thank you
Joseph White, Senior Strategic Risk Consultant Mobile: 07730 735 406 Office: 01252 387 822 E-mail: [email protected]