this decisive decade: the evolving risk landscape
by Elisabeth A. Wilson In 2021, we saw cyber security, data privacy, crypto currency, climate change, Environmental, Social and Governance (ESG), and third party risk all come to the forefront of our risk landscape, all jockeying for top position. Risks are being hurled at our institutions from all sides. Their presence may be magnified by the current extreme conditions under which we find ourselves as a result of the COVID-19 pandemic. The hard truth –and chilling fact– is that the pandemic has ushered in a much-needed sense of awareness across the financial industry that low-probability, high-impact scenarios can and will come to fruition. There is also an uneasy sense this may only be the beginning.
looming uncertainties The world faces an uncertain future. A confluence of events is taking shape this decade that will alter the course, not just of our history, but of our humanity. Recent scientific evidence indicates that current emission rates must be reduced within the next eleven years to avoid a global temperature rise in excess of 1.5 degrees Celsius (above pre-industrial levels), ratcheting up the unease with which we recognize ever more virulent weather-related patterns and events.1 Predicting and hedging against the potential economic, market, credit and operational shocks that could result from climate changerelated physical and transition risks is proving even harder to surmount at this time. Ongoing, dramatic shifts in political leadership across the global powers are changing not only the face, but the shape of geopolitics. Asia is set to overtake the West as the leading global consumer presence, which will alter world economic dominance.2 Cyber has become the new battlefront on which wars are fought, heightening vulnerabilities and instabilities inherent in the technology we increasingly rely upon. Artificial Intelligence (AI) will likely be the dominant form of technology by the onset of 20303, and the implications to both the job market and to global supremacy could be profound.4 Generation X and millennials stand on the cusp of inheriting the wealth accumulated by their baby boomer parents and grandparents, and these younger, more socially and environmentally conscious generations will likely reshape the business and investment horizon. Cryptocurrency is an additional layer in the mix of financial and economic ambiguity. And compounding it all is unprecedented political polarization and isolation, which is driving extremism and inhibiting compromise and progress. Our future is being reshaped daily, and rapid change and disconcerting uncertainty are the new reality.
020
Intelligent Risk - February 2022
