Enterprise risk management amidst global disruptions

The impact of COVID-19 is still very fresh on everyone’s mind, particularly for the business community. Whilst no doubt globalisation has improved our lives, it is obvious that in a connected world, the impact global disruption can have on businesses and livelihood is enormous. Who would have thought the world would be brought to a stand-still for nearly two years after the COVID-19 pandemic first came to light?

Before COVID-19, a McKinsey study showed that non-economic shocks are increasing both in frequency and in impact. The world has not forgotten BP’s Deepwater Horizon Oil Rig’s explosion in the Gulf of Mexico, Samarco’s dam failure in Brazil, Nokia’s spectacular loss of market share or the damages to Boeing following the. These disruptions have cost billions of dollars to shareholders, reputational damage to the companies, and unquantified damages to broader stakeholder groups. When these types of events are increasing both in frequency and impact, it almost throws the concept of a ‘Black Swan’ away.

A ‘Black Swan’ relates to events that would generally be classed as outliers – mostly unforeseen or rare. Were some of these events really a ‘Black Swan’? And if they were, could a more effective Enterprise Risk Management process, aided by a transforming technological landscape add to the ability to forecast these events more accurately or even minimise their impact?