WHEN TURBULENCE IS THE NEW NORMAL
Prof. K.K. Krishnan
Professor of Insurance Business Management
BIMTECH (View Full Profile)
As the world was meandering through the fog of the rising impact of climate change and geo-political tensions towards and of 2019, like a meteor strike comes the onslaught at Covid-19. In short, the risk landscape has been shaken up like never before by the zoonotic disease from Wuhan in the beginning of 2020.
Think Tanks Look Through the Dark Glass Dimly
The first to take a peep into the murky world of global risk was the World Economic Forum (WEF) at the beginning of 2020. They identified the following Global Shapers with disruptive capacity:
- Extreme Weather
- Biodiversity Loss
- Climate Action Failure
- Natural Disasters
- Human Made Environments Disasters
- Water Crises
- Data Fraud or Theft
- Involuntary Migrations
- Social Instability
- Cyber Attacks
One can see from the above list that climate related issues dominated the top Five Long Term Risks in terms of likelihood.
Who Let You In?
While the comity of nations was just about getting ready to deal with the WEF long term risks through formal and informal consultations in comes a most unwelcome guest, Covid-19 all the way from China.
Covid-19 was discovered to be a lineal descendant of the dreaded Spanish Flu, which ravaged the earth in 1918 and inflicted a causality of 5 crores of people.
A Sweeping View
SWISS RE, one of the foremost global authorities on risks and their mitigation in financial terms, has identified 14 Emerging Risk Themes and 4 Trend Spotlights which the world will have to negotiate. These negative variations can be observed impacting the societal environment, technological and natural environment political environment and competitive and business environment of the world.
The top three groups of risks which Swiss Re had identified are the overstretching of cyber security, the rise in intergenerational imbalances and issues related to carbon removal and insurance.
The Nitty Gritty of Covid-19 Risks.
KPMG, one of the leading global think tanks and consultancies, have prepared an exhaustive check list of 19 risks arising from Covid-19 (as well as opportunities) affecting human and institutional endeavors in varying degrees in the short and medium term.
These are:
- Fraud
- Cyber
- Physical & mental health & safety
- Contract obligations
- Business continuity, crisis management & emergency plans
- Disruption and innovation
- Social & Political instability
- Transport, logistics & travel
- Stakeholder management communication
- Tax & trade
- Risk & Compliance Culture
- New Regulatory requirement & opportunities
- Virtual workplace
- Reputation
- Economic downturn
- Working capital, cash management (incl. credit risk) & insurance
- Strategy & financial plan
- Steering information & data
- Third party management & supply chain
As they say, risk and opportunity are two sides of the same coin. Covid-19 which has brought about untold suffering to millions of lives (the current global death toll is estimated at 8,33,135 lives as on August 27, 2020). This event has also thrown light on opportunities in the digital Management, Public Health Management, Pharmaceutical Research etc. areas. It will be some time before a proper balance sheet of gains and losses and be drawn up.
The magnitude of risks that we are called upon to live with have changed overnight. They are humongous. We have to somehow make sense of this tumultuous new normal.
