Managing Risk And Opportunity

by Brigid Milligan, Jan 18, 2012, 8:29 AM

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Has the World Economic Forum been reading The Hunger Games? While the recent Global Risks Report doesn’t predict a world where children fight to the death for sport, it does warn that the “seeds of dystopia” are being sown. It’s definitely not a report to be read alone or before bedtime.

Now in its seventh edition, the 60-plus page Global Risks Report is based on a survey of 469 experts and industry leaders and describes a future that will be defined by rising unemployment, increasing disparities of wealth, depleting resources and overpopulation. Released a few weeks before the annual meeting of business leaders, central bankers and government officials, the report will undoubtedly set a grave tone.

The crux of the report is the analysis of 50 core risks and a breakdown of how likely the risks are to occur, the impact of the risk and the interconnectedness of the risks over the next 10 years. According to the report, the top five risks identified as most likely to occur in the next 10 years will be: 1) severe income disparity; 2) chronic fiscal imbalances; 3) rising greenhouse gas emissions; 4) cyber attacks; and 5) water supply crisis.

As Ben Hirschler wrote in Reuters, “For the first time in generations, people no longer believe their children will grow up to have a better standard of living.”

Taking a step back (and a step away from the computer to frantically change my online passwords), while the report is sobering, it isn’t dramatically new. In the article “Mobilizing for a Resource Revolution,” published earlier this month in the McKinsey Quarterly, researchers Richard Dobbs, Jeremy Oppenheim, and Fraser Thompson asked, “Is the world entering an era of sustained high resource prices, leading to increased economic, social and geo-political risk?”

The implications of restricted resources will be unique for corporations, governments, sovereign entities, etc. but, regardless, the role for sustainability and green professionals is more important than ever. Dobbs, et al., outline a strategic checklist to help organizations adopt a systematic approach to understand how to manage risks, but also, significantly, to identify potential opportunities – opportunities for growth and innovation.

As part of this list, green sales and marketing are specifically identified as areas where there is potential to increase internal efficiencies and ultimately improve revenue by stressing resource efficiency in marketing efforts. The savings can be huge. A notable example is that Wal-Mart saved nearly $3.4 billion after implementing a strategy for suppliers to reduce packaging from 2008 to 2013.

It will be worthwhile to see what recommendations emerge from the annual meeting in Davos later this month. The Global Risks Report it not meant to cast a shadow upon the future, but rather to be an agent of change. As Klaus Schwab, founder and executive chairman of the World Economic Forum, writes in the report, “The more complex the system, the greater the risk of systemic breakdown, but also the greater the potential for opportunity.”

I’ll be curious to know what you think will happen in Davos, let me know @Measure4What on Twitter!

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