Expert opinion suggests that levels of risk are rising in almost all of the 23 risks on which the Global Risk Network has been focussed over the last year – but mechanisms in place to manage and mitigate risk at the level of businesses, governments, and global governance are inadequate.
Global Risks 2007, World Economic Forum
In Part I we covered the 23 ore global risks of an economic, environmental, geopolitical, societal, and technological nature identified by the World Economic Forum and in Part II we covered the “5 Pathways” to mitigation identified by the report: improving insight, enhancing information flow, refocusing incentives, improving investments, and implementation through institutions. Part II also introduced to potential institutional innovations for managing global risks: chief risk officer and a “coalition of the willing”. Today we’re going to discuss some potential mitigations to each of the risks that you can consider in your planning efforts.
- Oil price shock / Energy supply interruptions
Consider using price hedging strategies and cutting long-term supply agreements from preferred suppliers.
- US current account deficit / fall in US$
Don’t just look at cost when making outsourcing and low-cost country sourcing decisions – look at total value. That way, if the dollar drops and your supply increases in cost, relatively speaking, it could still retain its value.
- Chinese economic hard landing
Don’t over rely on Chinese suppliers who could be hit hard by a Chinese financial crisis. Be sure to mitigate risk with secondary suppliers in other countries as well.
- Fiscal crisis caused by demographic shift
Closely monitor your financial situation in the G8 countries, especially with regards to debt financing as well as the financial situation of key suppliers in these countries.
- Loss of freshwater services
Don’t start or expand your freshwater bottling business.
- Natural catastrophe: Tropical storms
Be sure to insure all of your ocean freight and to maintain safety stock of key commodities on each continent.
- Natural catastrophe: Inland flooding
Do not build new production plants in areas at risk of inland flooding and be sure not to single-source key commodities or materials from such areas.
- Natural catastrophe: Earthquakes
Do not build new production plants near fault lines and be sure not to single-source key commodities or materials from such areas.
- International terrorism
Be sure to have a business continuity plan ready to go in each of your locations in the event of a terrorist attack on or near your premises.
- Interstate and civil wars
Be sure to keep an eye on the political situation of each unstable country you are involved with and have a plan in place to move operations to a more stable country should a war break out.
- Failed and failing states
Do not set up operations in any country that is failing. Furthermore, if such a country is the sole source of a raw material you require, find a back-up source. If you cannot find a back-up source, put on your innovation hat and try to find a product design that can use an alternate raw material.
- Transnational crime and corruption
Identify facilities that store critical information or materials and take appropriate actions to step up security. Furthermore, make sure you have a response management plan in place in the event of a crime in order to expedite matters with the local authorities and get you back in operation as soon as possible.
- Retrenchment from globalization
Be prepared for the slowdowns in trade that this could bring by having appropriate safety stock of critical commodities and raw materials in the relevant countries and have back-up local sources of supply identified just in case.
Understand your critical operations and insure a sufficient number of personnel understand each critical function and have plans in place to continue operations with at most half of your work force for short periods of time should a pandemic or new flu strain hit your area.
- Infectious diseases in the developing world
Understand that your suppliers in these parts of the world could be severely crippled through the rapid, unpredictable, spread of infectious diseases through their workforce and be sure to have geographically dispersed sources of supply for all key commodities and raw materials.
- Chronic diseases in the developed world
Understand the effects these could have on your workforce and put appropriate mitigation plans in place.
- Liability regimes
Undertake a careful cost-benefit analysis before selecting or avoiding a liability regime.
- Breakdown of critical information infrastructure (CI)
If your T1 line gets cut, your internet goes down, and so does all of your connectivity and on-demand applications. Make sure you have different wired and wireless connectivity services available, back up key data on site, and either run critical applications locally or use fat clients that do not require 24/7 connectivity to the on-demand service.
This is not meant to be an exhaustive list of risks, or possible mitigations, just some starting suggestions for your considerations to kick-start the process and your risk mitigation planning.