BEIJING, July 01, 2021

The Importance of Achieving Global Risk Agility

A number of risks that occurred sporadically in previous decades now occur with regularity and have become a permanent part of the global risk management mosaic. Whether interstate conflict, terrorism, extreme weather events, water crises, pandemics or cyber-attacks, the political, economic, environmental and technological spheres have now melded into a single challenging montage of risks that fall outside to control of any individual, organization, and most governments.

Any barrier that may have been perceived to exist between these risks no longer exists. We no longer have the luxury of assuming that an event in another part of the world will not impact our ability to function at home, or elsewhere abroad. The Anthropocene era – where man-made risk clashes with the environment - has combined with global shocks to create a nightmarish ecosystem in which to function.

As a result of this dynamic and constantly changing global landscape, risk managers and decision makers are struggling to respond, and have been forced into a state of perpetual reactivity. While it is absolutely true that some of today’s challenges cannot be predicted or prevented, others can, but even those require a change of mind set, standards and protocols in order to be in a position to address them proactively. Decision makers have, in essence, all been forced to become risk managers.

Global risk agility is as much about being bold and taking responsibility as it is about having both temerity and deference toward the unprecedented upsurge in man-made risk. The agile risk manager is in many respects a new renaissance leader—who knows as much about quantitative as well as qualitative risk, is a student of history as well as a master of current events and understands the long-term impact of actions being taken today, rather than merely being short-term and profit orientated. Such agility implies a deftness of movement. Whether the required pace given the circumstances is slow or fast—movement is the key.

While the data may suggest that everything is fine, silencing one’s instincts occurs all too often in organizational decision making. Agile risk managers therefore need to be as courageous in confronting authority as they are poised in the face of new challenges. The agile risk manager conscientiously strikes a balance between the maximizers, whose modus is as much as we can as fast as we can, and the optimizers, who strive for as much as necessary for as long as possible.

Global risk agility is also about asking the right types of questions, such as, has the decision maker ever been to all the locations where the business is operating? If so, was it more than a year ago? Does the organization have the information, insight, and tools needed to prepare for a global shock? Does corporate culture create an environment conducive to challenging long-held beliefs and operational practices? Are employees who challenge collective wisdom rewarded or punished? The potential consequences of not being able to answer such questions in the right way are greater than ever.

In this era of the collision between man-made and natural risk, agile risk managers are a new breed of organizational leaders who are part psychologist and part financial guru. To rise to the occasion and help organizations harness the unprecedented yet unforgiving upside that can be created, we must move the discipline of risk management from being a business prevention function—a cost of doing business—to being a catalyst for longevity.

Professionals in the decision making and risk management domains need to take a long look in the mirror. They need to adapt personally, as do the organizations they work for—particularly since organizations are beginning to leave board rooms and corner office doors ajar. For organizations to fully harness the power of risk agility, those at the top need to be challenged to fully integrate and master long range planning, entrepreneurial culture and bounded risk-taking not merely as profit mechanisms, but as a means of survival.

What is required is a proactive approach that entails closely monitoring the forces that drive change, analyzing their relationship to risk, and adapting the strategies required to manage risk flexibly. While we must integrate the lessons of history into the risk analysis process, risk agility is all about harnessing those lessons and combining them with rigorous instinct to generate effective decision making in the era of the clash between natural and man-made risk.

Daniel Wagner is senior investment officer for guarantees and syndications with the Asian Infrastructure Investment Bank in Beijing. He is co-author of Global Risk Agility.

*Used with permission from The Business Times (BT) where this article was first published.


Daniel Wagner

Senior Investment Officer for Guarantees and Syndications, AIIB

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