January: The Month of Predictions.

Every big player, and some smaller ones, are throwing their risk reports at our screens. And just as sex sells, so do dark predictions.

The current state of the world is, well, somewhat dark.

According to the World Economic Forum's global outlook, 63% of participating global leaders believe the next 10 years will be stormy, or at least turbulent.

This brings me to extreme weather (apologies for the abrupt segue).

66% consider extreme weather the top risk in the coming years.

It could be, it is still heavily underestimated.

Let me explain how I came to this conclusion.

(You are right, I am by far no climate scientist. But this is not the point).

Recently, I listened to a podcast from The Great Simplification, discussing a topic I had already written about in the summer of 2023, inspired by an earlier podcast featuring Nate Hagens and Leon Simons.

Leon Simons, a climate scientist, stated that there is a highly uncertain yet potentially high-impact factor that many scientists are overlooking:

Aerosols.

Human-made dust particles, which are not good for the environment (in the long term), but shield the planet from heating up due to their filtering effect on sunlight.

Since these human-made aerosols are harmful to the environment, policymakers are attempting to reduce the use of substances like sulfur in fuels.

A regulation was put in place in 2020 that will drastically reduce the use of sulfur, an important component of sulfate particles, which are the strongest cooling agents, in the shipping industry.

This means that gradually, the reduction of sulfur will lead to fewer cooling agents and less shielding of our planet from sunlight. This will lead to an increase in sea temperature and so on.

This, plus the change from La Ni?a to El Ni?o, which usually has an important impact on weather patterns (often not a good one), is causing many smart people headaches.

Now, let's focus on resilience, supply chains, security, and more...

In the podcast, Leon Simons was talking about a potential (temporary) 2°C degree uptick to the pre-industrial baseline this summer.

There is high uncertainty; no one can clearly say what will happen if the temperature increases by XY% °C.

Only thing we can say, in complex systems, with tipping points, things can turn bad really quickly.

And a 2°C temperature increase can lead to severe climate impacts and extreme weather events, according to leading scientists.

What does this mean for our Resilience Programs? We are likely to see the following:

• Mass movements from poor regions, as conditions worsen.
• More frequent and severe extreme weather events than last year.
• Droughts and Floodings.
• Increasing Food prices.
• Higher Crime rates.
• More violence.

To name just a few.

Now add a year with globally more than 50 elections, and huge possibilities in disinformation, and we might get served a cocktail we don't like.

In my opinion, understanding this is key to preparing our companies for potential disruptions and security risks.

Here's how companies can prepare themselves:

Understand your global footprint and value chain

• Analyze which countries are high risks and compare exposure.

Find Bottlenecks in your Supply Chains

• Consider the low-water levels of the Panama Canal.
• Geopolitical exposure e.g., Bab al Mandab Strait or Strait of Hormuz.
• Single suppliers in high-risk areas.

Create Contingency plans

• Plants.
• Warehouses.
• 3rd Parties.

Ensure visibility

• Transparency and Visibility are key for many things.

Ensure Security

• Cybersecurity is top of mind, and the risk is high.
• But, Physical Security is still very important. One doesn't work without the other.
• Travel Security will increase in importance.

Learning Organization

• Companies need to stay on top of important risks and provide their employees with ways to educate themselves.
• This will become more crucial in light of the anticipated labor shortages.

Regulations

• There are several important (and costly if you don't comply) regulations already in place or about to be implemented.
• If you do this right, it will help and satisfy the regulations.

This list is, of course, not exhaustive. Just important starting points.

The point is, our risk landscape is changing quickly, and then again, not. Climate risks have been on the list for several years now.

We just (collectively) ignored them.

Unfortunately, this is not how it works. And now, it seems overwhelming.

But only if you don't look at the interconnectedness of risks.

If we did, we would know that one factor can amplify another, small risks can grow exponentially.

At first, we don't recognize significant impact.

The moment we start recognizing, it's (almost) too late.

We are at such a point in the exponential growth curve, that harm is accelerating at a speed we have a hard time coping with.

On the bright side, we also show this behavior in the opposite direction.

Once we realize an issue, we put a lot of effort into it and still manage to make a difference.

Anyway, some things can't be prevented anymore.

So we have to prepare.

That means getting familiar with complex systems, understanding which risks to focus on, and how to prioritize mitigation.

We need to master resilience.

I wish you a great weekend!

Marco

P.S.

I am hosting a 1-hour Master Class on how to analyze climate risks on Tuesday, 13.02.24. Registration via the link below.

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