Understanding Emerging Global Risk
This article focuses on three areas of emerging global risk — Geopolitical-Economic, Environment, and Technology. Though all are inevitable, however, it lacks attention and a multistakeholder management approach. I will also introduce you to Risk Manager- without going into details. I additionally share my perspective on the challenges associated with global risk management.
Geopolitical Economy: In the last two centuries, we have witnessed the economy become global, and each country’s economy becoming more tightly coupled with the rest of the world. Within the same time frame, countries like China & India have become an integral part of the global economy. It is good to see economic power being spread. It makes trade between countries more accessible and efficient, benefiting the end consumer. But this has also created microeconomic fragilities and financial inequality and increased the likelihood of economic stagnation.
Furthermore, internal tension in one country disrupts the entire supply chain. A local issue in China can impact the paycheck of someone working in the US. Political dispute between countries is not new, but in the last four years, the bond between the world economy’s heavyweights, i.e., the USA and China, saw continuous strain. As a result, it cost both massive financial losses. The US-China tariffs conflict also had a cascading impact on the rest of the world. If one major player in the global economy fails or chooses national interest instead of global, the rest will experience a negative impact. And in the years to come, a conflict like the US-China tariffs will have even worse consequences. In terms of economy and geopolitics, risk will only increase as we become more reliant on the global economy but make things worse without a multistakeholder approach. In the 21st century, the global economy and political ties are controlled and owned by a handful of countries like the US, China, India, and few European countries. Risk will fluctuate based on the relationship between these countries. Even at the national level, governments struggle to come up with a Multistakeholder approach. Every four years, the administration changes and wipes out everything that was put in place by the previous administration.
Environment: As humans, since the day we have become sensible and started to innovate, we have initiated the destruction of the rest of the ecosystem. We source all our needs from nature, and in return, we have not done a good job protecting the environment. In the last decade, people around the world have witnessed drastic climate patterns. There is substantial natural evidence that shows we have harmed the ecosystem. There have been several types of research on the loss of marine life and even the extinction of several species. Today with the help of modern technology, we can easily forecast environment-associated risk. For example, we can know how many degrees the temperature will increase in the next five years. In the case of the environment, the risk is easy to forecast, and it only indicates that it will worsen. But the challenge is no one is ready to believe it. Yes, some countries have realized the risk, but it is not enough to take immediate global action. And those who do, are not committed. For example, in 2017, the Trump administration ceased all participation in the 2015 Paris Agreement on climate change mitigation. Despite the evidence, ability to prove, and urgency, global risk like climate change is still not getting the proper attention and investment. All the nations need to come together and collaborate to form a standard policy around environmental protection. It cannot be a presidential term-based exercise or a victim of political priorities.
Technology: According to the report, around 50% of the world population, i.e., 3.8 billion, are online through one more many platforms. From social media to daily operation, everything is done through a computer or smartphone, which means more and more data every second. Today, data is the new gold. Companies and countries spend billions to advance their technology to generate or gain access to data. But the risk with the growing data is growing at an alarming rate — many countries around the world lack any governance or even general guidelines around user data. A few years back, the EU introduced GDPR (Global Data Protection Regulation), which protects citizens’ privacy. The US and many other countries are yet to introduce a similar policy. It is an example of the difference in understanding the protection of citizen privacy. We are in urgent need of a global policy to protect everyone’s privacy and data. Today, a company in Europe uses software made in the US, and the development happens in India. Without a standard security protocol, an intruder can easily invade. Instead of forming reliance and fighting a shared risk, countries secretly conduct cyber-attacks against one another to access confidential information. Similar is the situation with AI. Governments need to come together to contain the exploration of AI and form strict regulations. AI is a technology that will either turn out to be a helpful resource or turn into a nuclear weapon.
Risk Manager: According to Google, a risk manager is an individual responsible for managing an organization’s risks and minimizing the adverse impact of losses on achieving the organization’s objectives. He/she is also responsible for developing and maintaining the organization’s risk culture. They do this by setting the tone from the top, giving overall strategic direction and vision concerning risk. But the question is, in the context of global risk, who is this leader? I leave it as an open-ended question.
Conclusion: In my opinion, the world is only connected economically but divided by politics and global policies. The division is going to spread further apart post-pandemic. It is yet to be seen how the trade and relation with China will change the global landscape in the next few years.
Global Risk management is challenging, unknown, and beyond one person or countries capacity to solve the problem. It cannot be assessed based on just the known metrics or national understanding. For example, a manager from Minnesota who manages snowstorms during winter would not be competent enough to handle a risk Tsunami. This is where Global Risk Manager comes into play. I believe, Multistakeholder approach is the best way to manage Global Risk and the Risk Manager is the founding pillar of the solution. As individuals or countries, we must have a mindset and willingness to take the stakeholder approach to resolve global risk. We must have standard policies first in place to tackles global threats like climate change, microeconomic fragilities, and cyberattacks. Countries cannot be operating in a silo and establishing a solution that works for their benefit. Forecasting will only be accurate and efficient if we share our resources and data and fight together. Unification is required now and hereon more than ever. If we had a unified approach to handle the Covid outbreak, every country would be appropriately geared to communicate and tackle the pandemic. Even today, every country has biased views on Global warming and pandemic based on political argument, financial greed, and national ego. In the last year, we saw our societies further divided as the influx of discrimination increased. As we further divided ourselves by gender, age, country, religion, the risks will only spread and expose us to more vulnerability. With this momentum, we will not succeed in risk mitigation nor recovery. As a result, global risks like climate change or cyber-attack will only worsen and eventually go beyond our control.