Risk Management Update for 2023

It goes without saying, things are changing more rapidly then in the past. That should be no surprise to business leadership. The question remains, what should we be thinking as we now have more experience in global issues? And more factors to pay attention to than in the past.

The just released article on 2023 top geopolitical risks according to Eurasia Group articulates the main factors we all are facing today. Worth a 5 min read, we are reminded that risk management is not just a sourcing or purchasing problem to deal with, rather a business wide set of challenges that inform strategy and execution requiring participation from all functions of a business. And it requires more monitoring than in the past to avoid larger problems that otherwise develop. Just like an airplane going from point A to point B, we cannot just aim it and plan to not make regular adjustments. We are well advised to make frequent course corrections based on recent information. And like the weather, waiting 15 mins often shows us changing conditions.It goes without saying, things are changing more rapidly than in the past. That should be no surprise to business leadership. The question remains, what should we be thinking as we now have more experience in global issues? And more factors to pay attention to than in the past.

Having a robust risk management strategy now means we want more inputs, more points to take temperature of the biosphere all around us. BUT we also require more, (better) ways to apply scrutiny to separate the wheat from the chaff, to extract the meaningful few from the trivial many. We need ways to scan the horizon, identify new information as it relates to our risk mapping. A best-practice might have been to hold an annual review. That probably is not enough in today's business environment.

New best practice calls for modeling and evaluation of streams of data to constantly update changes at all levels. I believe we will continue to see AI play a growing role in data mining in this space. Considering all aspects of the PESTEL analysis, Political, Economic, Social, Technological, Environmental and Legal. Then consider each level of engagement.

* Global

* National

* Regional

* Local

Once you have built the Risk Map, it becomes somewhat easier to update and refresh. Now you have described the landscape and it's time to evaluate options.

* Accept - do nothing differently, ride the wave/bull.

* Avoid - can you avoid this risk entirely?

* Transfer - share or pool the risk across supply chains and business partners, or insurance. (Be very careful with this one, the fine print may surprise you).

* Mitigate - reduce potential impact or substitute alternatives where possible.

The evaluation must be able to quantify cost of impact and probability in monetary measure so that you can consider response costs, prioritize and implement appropriate actions or plans.

Finally, the biggest difference now is having the capability to act VERY QUICKLY. Time to respond is hyper critical. Many firms have discovered the hard way, waiting to have a perfect picture often leaves you without options. Case studies abundantly show that waiting to take action is the kiss of death where supply chain disruption is already taking shape. That means you will want to have plan B in place before it is needed. To have a scripted plan ready to implement based on condition. We never have fun changing the tire while driving on the highway at speed.

If you would like more insight into risk management and strategy delivery planning, there are excellent resources we can offer to support your new focus.