Is your risk register too conformist for era of uncertainty?
We are entering an era of "total uncertainty" and businesses and risk managers need to be bold in their response, according to former BBC journalist Nik Gowing, now visiting professor at King's College London.
In the opening speech at Airmic's ERM Forum, Gowing argued that a proliferation of "unthinkable" events over the past few years has revealed a new fragility in the world order and that businesses are in denial about the enormity of global changes occurring at rapid speed.
Recent events such as Britain's vote to leave the EU and the election of Donald Trump as US president were all foreseeable events, he said. "There is an inevitability about a lot of what is happening."
Why is it so hard to think the unthinkable? According to Nik Gowing, there are nine reasons:
- Being overwhelmed by multiple, intense pressures
- Institutional conformity
- Wilful blindness
- Groupthink
- Risk aversion
- Fear of career limiting moves
- Reactionary mindsets
- Denial
- Cognitive overload and dissonance
According to Gowing, events such as President Putin's seizure of Crimea, the rise of so-called Islamic State and the outbreak of Ebola were part of a "dramatic set of new strategic ruptures". Added to which, he said the hollowing out of the middle classes in the West and poor prospects for millennials is turning the political order on its head as those in power are perceived as too detached to govern effectively.
This trend is manifesting itself within businesses as members of the public and other stakeholders now demand to understand what happens within an organisation and whether it shares their values, he said.
"It's no longer just the quarterly numbers that matter, it's how the public sees the company on the inside," Gowing argued. "We need to be less smart and more like normal people. How you put that in a risk register, I have no idea but it's the context you and your boards have to work in."
Gowing, co-author of "Thinking the Unthinkable", said that risk professionals need to be encouraged to challenge senior management without the concern that it may be a career-limiting move. "There is a core need to accept constructive challenge within institutions. Too often risk professionals are expected to conform and only to challenge within certain parameters."
He called on risk managers to be less conformist: "Is your risk register so narrow as to be irrelevant? Is it a risk register that conforms? You need to think the unpalatable: that is central to what you put on your risk registers."
More information on "Think the unthinkable" can be found on thinkunthinkable.org