Speaking at PARIMA’s Bangkok conference, chairman Franck Baron spoke at length about his views on the rise of artificial intelligence, digitisation and how risk managers can prepare for the fourth industrial revolution.
The world has always experienced significant changes through the ages which we now call ‘disruption’. We are already in the midst of living through the fourth industrial revolution with the technology changes we are witnessing every day.
The key thing about today’s industrial revolution is that disruption is occurring more frequently, that’s for sure. It is having a faster and more immediate effect than it has in the past. So much of this is due to the interconnected nature of how we all live, work and benefit from this.
As an example, in 2017, more data was created in a single year than what humankind had managed to create in the previous 5,000 years. Another interesting fact on this fourth industrial revolution is that more than half of the scientists and researchers in the history of mankind are alive and working today. This says a lot about the evolution of our world in terms of knowledge and in terms of the rapid the expansion of people who are supposed to think about the next generation of science and technology to be used in our communities.
Currently, most disruption in business is focussed on actions, processes and services, which also enables are sharing economy where, as you know, ownership is not a prerequisite of use. We have witnessed this already through organisations such as Airbnb and Uber.
I believe that risk management is a unique enabler to help executives to make good decisions, to take the right investments and make their companies more sustainable operationally. When it comes to evolution and revolution, risk management is a critical asset to organisations.
Risk management has a cost, for sure, but the risk manager should be able to advocate at the highest level of the company to make sure these costs are not skipped for short-term results.
One of the biggest challenges for risk managers is that we are here to help businesses have a long-term perspective on things and we have a day-to-day challenge in managing this. We have to help c-suites in balancing against the short term performance they have to deliver whilst also keeping a long-term view of things.
Accelerating technological advances add further uncertainty. We are in a new era of robotics and artificial intelligence. This has already transformed many things and will continue to transform things. There are spectacular divisions on how to manage artificial intelligence which exposes big questions about the culture. Risk managers should be there for companies so they can avoid living in some sort of Utopia on this issue. We, as risk managers, have to be able to understand what is happening and help our organsations cope with it.
Many obstacles exist, with the main one being the corporate culture. The barrier is linked to the style of leadership within a company and each company has a different culture obviously. If your company is driven by people who are profit-centric then it can mean they have a very short-term view, creating a barrier to the way risks are managed in the longer term.
Y2K or Y2038?
Depending on your age, you may remember to Y2K bug from 1999 which was supposed to bring millions of computers to their knees. We will never know if that was just a huge overreaction to a minor danger or if indeed there was a real problem which sent countless coders to fix it. The point is we did not feel any real consequences to what could have been a real issue or just an overreaction.
Interestingly, and I am not sure if you are familiar with this type of exposure, but apparently, according to very recent research, we are supposed to have the Year 2038 bug lurking in the system. In 2038, we will be managing the same type of situation which we were managing in 1999.
The late Stephen Hawking and Elon Musk are both of the belief that artificial intelligence could spell the end of the human race. Artificial intelligence may bring a lot of good things to us but it may also be able to destroy humankind.
The fourth industrial revolution gives us several thought-provoking avenues on how the world will change based on the increased speed of computing and artificial intelligence. No one will be unaffected by this so there is no room for any of us to say ‘I am not comfortable with this’. It is happening to all of us, it is affecting all of us and we must be good at managing the risk of it.