April 2021
Citi GPS: Global Perspectives & Solutions
Prevention, Mitigation, and Adaptation “Since the financial crisis of 2008, the world has been drifting towards a perfect storm of financial, political, socioeconomic, and environmental risks” Nouriel Roubini Scientists have been warning us for years about pandemics and that it is not a question of 'if' but 'when'. Addressing the immediate health crisis should of course be a priority, but we also have been presented with a rare opportunity to reset and rebuild a more sustainable, inclusive, and resilient future. We cannot return to a business-as-usual path that was heading towards a 'perfect storm' of systemic risks with potentially catastrophic consequences. The COVID-19 pandemic has brought to light three important trends: 1) The inter-connectivity across planetary, human, and economic health; 2) How crises disproportionally affects the poorest people and nations; and 3) Just how unprepared the world is when a global crisis takes place. Having identified our Global Risk Nexus of 10 key systemic risks, quantified their potential impact in human and economic terms, and tried to understand their interlinked nature, how do we adddress those risks — in terms of preventing them, or where that is not possible, limiting their impact, or preparing ourselves as best we can to live with them? As a starting point, we interview two experts in the field of systemic risk to hear their views on the barriers to addressing systemic risk, and actions to overcome those obstacles. Our first expert is Dame Inga Beale, previously CEO of Lloyds of London, and President and Chair of the Chartered Insurance Institute, who brings enormous insight from the world of insurance, which is, given the core function of insurance, considerably ahead of the broader financial community in quantifying, mitigating, and mutualizing risk. Our second expert, Mark Carney, ex-Governor of the Bank of England and Chair of the Financial Stability Board and now UN Special Envoy on Climate Action & Finance, is arguably the individual who has done most to drive awareness of the implications of climate change for the financial sector, from the seminal ‘tragedy of the horizon' speech, to being one of the two founders of the TCFD via the Financial Stability Board. Their views on the barriers to addressing systemic risk form a critical element of the proposed solutions for mitigation and prevention which follow the interviews.
© 2021 Citigroup
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