The clock is ticking

Earlier this year, scientists reset the symbolic Doomsday Clock to its closest time to midnight in 64 years. Threats such as nuclear weapons, climate change and Donald Trump make a global cataclysm more likely, they say.

The timepiece, devised by the Chicago-based Bulletin of the Atomic Scientists, is widely viewed as an indicator of the world’s vulnerability to disaster.

Its hands moved from three minutes to midnight to two minutes 30 seconds, symbolising humanity’s possible path to catastrophe.

There’s an interesting corollary between risk management and the Doomsday Clock: the general consensus with both is that if you can measure risk, you can manage it. That’s not to say you can stop an event from happening, but a cognizance of the risks facing the world – or a company – means you can move forward with your eyes open and take appropriate steps along the way.

Companies today are certainly becoming more sophisticated in how they measure risk.

And there’s more literature than ever before on the top concerns facing corporates. In all of the recent risk reports and predictions – from the Doomsday Clock to the World Economic Forum (WEF) annual report, to the many other reports put out by consultancies, insurers and brokers – two constants stood out: the environment and political risk.

The latest issue’s two special reports look at both of these topics in more detail. We ask what they really mean from a business perspective and how strategic and forward-looking risk management can help.

Climate change was the number-two underlying trend in the WEF’s 2017 report. For the first time, all five environmental risks in the survey were ranked both high-risk and high-likelihood, with extreme weather events emerging as the single most prominent global risk. But if climate change is difficult to measure and mitigate on a national or global scale, it’s even more challenging for businesses to do so, since measurable impacts and controls can be somewhat opaque.

Some companies are giving it a good go, however. Ayala Corporation in the Philippines is a great example. For the latest issue, I spoke to the group’s head of risk management and sustainability, Victoria Tan – one of the few professionals I’ve met who double-hats across the two disciplines.

She says the combination of risk and sustainability makes sense: “We want to be a sustainable and resilient organisation and [the board] is expecting that risk management will create value for the organisation.”

Tan and her team are about to embark on the first group-wide project on sustainability, aiming to reforest and protect 13,000 hectares of land.

A measurable result and a mitigant to a global risk, and the first step for the group in demonstrating the actions it’s taking to minimise its impact.

Environmental impact will be a particularly interesting risk for companies to deal with in the coming years. Directors for one should be looking at the issue in a new light, with some lawyers predicting it could be a new frontier for management liability claims.

In this issue’s other special report, we look at the trade credit market as it relates to political risk. The changing political landscapes in Europe and the US have not le Asia-Pacific unscathed, while a slowdown in economic growth has put a dent in optimism and increased pressure on businesses operating in the region. Taken together, this is having an impact on the market for trade credit, as companies look to transfer the risk of their portfolio on to insurers.

So, whether the Doomsday Clock is prophecy or fiction, there’s no denying that 2017 will continue to bring new challenges for companies and individuals the world over.

If nothing else, it will be an opportunity for prudent risk managers to show their worth.