Sketching 2020 From a Risk Management Perspective
Effective Risk Management is all about identifying, evaluating and prioritising risks. If 2020 has proven something is that unpredictability and change is certain. When you map out scenarios in order to prepare your contingency plans, you need to ideate out not just the obvious choices of ‘what could go wrong’, but instead determine your response to many different and extreme turn of events that could take place. In this blog article we take a look at this past 2020, to realise how far we have come and how much is yet to be done but above all, to understand how fast scenarios can change: both within your organisation or on a global scale.
One thing we know from Risk Management is that the unpredictable is likely, and change is almost certain.
When you map out scenarios in order to prepare your contingency plans, you need to ideate not just the obvious choices of ‘what could go wrong’, but also determine your response to many different and extreme turn of events that could take place within your organisation and around the world. Such business continuity planning sessions often leave risk managers patting themselves on the back at their wild and inventive imagination, but as Benjamin Franklin said: “Rather plan to fail, than fail to plan.” In this blog article we look back at 2020, to realise how far we have come and how much is yet to be done – but above all, to understand how fast scenarios can change: both within your organisation and on a global scale.
Now, if we look back at January 2020 and our view of how the year might have unfolded, it looked like a year with a prime focus on environmental and climate change risks – fueled by the increasing devastation of the bushfires across the Amazon Rainforest, Australia and California. The year was also set to largely be characterised by geo-political risks, which saw an attack on a leading general in Iran with subsequent retaliations on US military sites – including an aircraft incident. Another unmissable key player that year was the upcoming elections in the United States which, whatever the outcome, would likely tip the domino to reveal a series of further knock-on effects. It’s safe to imagine that many businesses had contingency plans centered around those points, which would be entirely correct to do – but it begs the question of how many stopped there, not predicting the unfolding of everything that might happen next? The world first learnt about a new virus in Wuhan, China in December 2019 and later reported the rise in cases of patients being treated for pneumonia-like symptoms. China confirmed its first death on January 11th.
As the year progressed, February began and a disruptive change in the risk management landscape was caused by COVID 19 which, until then, seemed like a China isolated incident. Progressively, we saw the virus advance and hit Europe first on its way to impact the entire globe. Countries started shutting down their borders, closing businesses and quarantining citizens in hopes of decelerating the propagation of the virus. Economies started shutting down, one after the other, harshly impacting the stock market as well as people’s pockets. With quarantine and the shut down of businesses came home office, which for a large number of companies unfamiliar with remote working in such a broad and drastic scale, meant critically unsecured networks, hardware supply challenges and a lack of proper personnel training on how to maximise productivity or compartmentalise personal/work life, which generated a negative impact in the productivity and happiness of employees. E-commerce rose dramatically, provoking hard pressure on supply chains due to the lack of shipments from China. Interesting fact: In the retail industry, hoodies were almost sold out across digital stores for the first time in history. Some resulting risks that became evident were a lack of team collaboration, for those not used to home office, people working remotely and physically isolated from one another, mental health issues related to isolation or dual stress, in the case of parents who were unable to separate work from their responsibilities to their children. Leadership required a dramatic change of focus.
Spring passed by and the world panorama only became more gloomy. Many businesses experienced bankruptcy or liquidity risk following the shut down of the economy. Furthermore, society drifted towards an even more radical polarisation with protests against COVID 19 prevention measures both in Europe and the United States. In the US, Black Lives Matter protests rose along with massive lootings and violent protests in several major cities. Medical workers were completely overworked and the number of COVID 19 related casualties became alarming mainly in the United States, Spain, Italy and the United Kingdom. The pharmaceutical industry studied the virus heavily as the race for a much needed vaccine was on. Major profit was the prize for the fastest to reach the finish line and develop a safe, effective vaccine. Due to this unprecedented situation, extreme risk on health insurance fees became evident.
During Summer, governments across the world loosened their restrictions on partial or full mobility once again, allowing society a “return to normal”. The term new normality became wildly popular as life as we knew it became more and more distant. The EU only allowed traveling within Schengen territories and many other countries around the globe kept their borders shut as well. Face masks and social distancing became part of our daily lives, however with the nice temperatures of Summer in the northern hemisphere and the need to reactivate the economy, resulted in a type of COVID exhaustion and a lackadaisical attitude to the rules. Being able to properly understand and manage risks was never more evident.
Fall and Winter came and all eyes were on the approaching US election. This event drove major uncertainty to the world economy. The death of Supreme Court Justice Ruth Bader Gingburg (RIP), created an available place in the Supreme Court as Trump rushed to name Amy Coney Barrett as the notorious RBG’s replacement, creating doubt around whether a legitimate election would be accepted by the president or challenged in the nation’s highest court. Due to restrictions being loosened during Summer, a second wave of COVID 19 hit various areas around the world leading to new lockdowns which put heavily impacted industries at risk once again. Political uncertainty arose in relation to various scenarios such as: Brexit, clashes in the EU on joint funding combined with securing “rule of law” principles (EU vs Hungary / Poland), terrorist attacks still happening around the world and a trade agreement in Asia that could potentially harm western-world economies. Every seemingly isolated event, no matter how big or small, both within or outside our organisation, is connected to a number of potential risks.
As we reached the end of 2020, some good news came along. Successful vaccines for COVID 19 were produced in mass and vaccinations began in several parts of the world. The ability to ramp up necessary vaccination capacity is uncertain and may impact the revival of economic and social stability. The impending inauguration of President-Elect Biden is helping to stabilise relationships between the US and EU once again and reduce volatility in the stock market.
During the final stretch of the year, the ability to safely and securely manage the software supply chain and vendor risk management as a whole came into focus, with the revelations of the SolarWinds’s Orion Platform hack resulting in the compromise of sensitive data within many high profile organisations and government agencies. This Advanced Persistent Threat put many organisations on notice that no matter the size or maturity of your organisation, there is always the possibility of compromise, especially when nation states are involved.
What will be the extent of the repercussions and damages provoked by COVID 19 both socially and economically speaking? When will the ever more pressing issue of climate change be addressed? What major social and political issues will 2021 bring with it? How will your organisation manage its risks in 2021? Is your organisation equipped with the best risk management capabilities?
Effective Risk Management is all about identifying, evaluating and prioritising risks. If 2020 has proven something, it is how uncertain the global landscape is and how drastically it can change. Whether on an organisational level or on global scale, properly understanding risk has never proven to be so important. At Alyne we aim to help your organisation effectively tackle its own specific risks. Reach out to us for more information.
Editor’s Note: This post was originally published to the Alyne site. After the 2022 Mitratech acquisition, the content was moved to the Mitratech site.