We are living in an unusual time. Never before have I witnessed such a dynamic, fast-moving, unpredictable environment. With natural disasters and food and water shortages displacing millions of people around the globe, the debate around the need for a concerted effort to address manmade climate change has never been more intense. At the same time, global cooperation and sustaining free and fair trade are becoming more difficult amid a rising tide of nationalism. Technology is bridging the gaps, but it is also raising concerns about personal data privacy. Business leaders need to be on high alert, all the time.
We examine these emerging risks and more in the latest edition of Protivit’s PreView newsletter. This publication is part of a series which focuses on the defining issues of our time. We hear all the time of the need to “look around the corner” to anticipate what’s coming. Protiviti’s Risk and Compliance Solutions team scans the risk landscape for each issue of PreView and provides informed insights on matters we believe have the potential to fundamentally change the risk profile of our clients in one or more industries and impact one or more of the World Economic Forum’s (WEF) five global risk categories – economic, technological, environmental, societal and geopolitical. Like the WEF, we try to take a longer time horizon when assessing emerging risks than considered in most company risk assessments.
Here are some of the top risks highlighted in the most recent issue:
The interconnectedness of environmental risks with other major risks, such as water and food crises and large-scale migrations, make climate change a uniquely difficult, unprecedented and highly critical challenge to undertake. Even organizations with sound infrastructure and disaster-recovery plans can find themselves in crisis due to the unpredictability of weather as a result of climate change. Businesses must ensure they have continuity plans that adequately address potential climate-related events, including water crisis situations.
One type of business is uniquely affected by climate change – insurance. We spotlight the industry in our current issue and will continue to keep it on our radar as it evolves its business models to address this major global risk.
The Retreat of Globalization
While globalization has been greatly beneficial to the world’s economy, an increasing number of leaders from some of the world’s more developed countries have adopted the position that actions taken to promote a global economy undermine their respective economies, eliminating jobs, suppressing wages and hurting the middle class. This change in the political agenda, combined with other factors, could herald a retreat of globalization — at least for the time being.
One possible exception: The largely open-border internet has provided developing countries with economic opportunities previously only gained via outsourced manufacturing. Key statistics show that the rate at which the world becomes more connected via technology continues to expand. Yet even this bright spot comes with the caveat of possible restricting regulations, especially as it relates to the collection and use of personal data. The word on everyone’s mind: GDPR.
Reality — Virtual and Augmented
Best known as an entertainment technology, virtual reality (VR) and augmented reality (AR) are finding broader application in commerce, education, healthcare, real estate and hospitality, among other areas. The VR and AR market size is expected to grow ten-fold from its present value by 2020.
VR and AR technology is a prime example of a risk (to those who ignore it) and an opportunity (to those with a vision) that was virtually off the radar of most businesses until recently, but has the potential to be truly transformative in the future.
Smartphones and the “Text” Generation
The change in communication precipitated by smartphones is as profound as that brought about by the introduction of color television sets. Researchers are looking into the effects of this immersive technology on younger people, specifically those born after 1995, who have never lived without the internet. Some of the concerns raised by the proliferation of the technology relate to personal privacy and the health of the user; others see potentially profound implications for the workplace as younger professionals overwhelmingly prefer text and online chat as primary methods of communication. Balancing the benefits of allowing employees to conduct business on personal devices with the potential for lost productivity and the risk of hacks and data breaches via unsecured devices is an issue employers of the iGen workforce need to address today.
Other emerging risks on our radar right now include the effects of automation on wages and income inequality (a continuing topic in the PreView series), and the massive economic potential/threat posed by China’s One Belt One Road (OBOR) infrastructure initiative.
As always, we encourage business leaders to think about how the above issues affect their organizations and ask themselves: What should we do now to prepare? Is there an opportunity we should pursue?
At Protiviti, we have the advantage of learning of these and other “around the corner” risks through our work and conversations with our clients, colleagues and peers, C-suite executives and board members. We are happy to share those insights and we hope you find them helpful.