Is a five-year horizon too far to be looking into the future? As Risk Managers, too frequently, our focus is “short term” (today, this year, maybe next) and too often “internal”. BeyondRM, as part of our series of conversations, decided that we should look beyond, and, as usually happens at the beginning of years, make some predictions for five years from today.
With eight participants in the conversation, there was a wide range of predictions, yet also some common themes that we discussed. Early in the conversation, it was suggested that one way to consider the future was to envision the world in 2027/28, and consider the drivers that created that world. This provided a good framing for considering each of the predictions that were made or considered.
Some areas of prediction were quite macro in nature, while others were specific to the Risk Management profession.
Broadly, the predictions covered:
- AI (present and future)
- Flexibility and Agility of RM
- US Economic Empire eclipsed
- Reality/Virtual boundary
- Inter-state Conflicts/Wars/Civil wars
- Climate impacts
A huge range was canvased in our ninety-minute session. A consistent theme through each of the prediction areas discussed was the question of what weak signals we should be watching, and why do we keep missing them (collectively and individually).
- AI. While definitely viewed as a major risk and opportunity five years from now, it was also pointed out as a current issue. How will capabilities such as ChatGPT and other AI evolve, and how will that impact our ability to identify and manage risks, including the risk (and opportunities) associated with implementing AI capabilities across business activities? Outside the office, will AI reinforce our information echo chambers, or will it enable more diverse thinking and acceptance of alternative views on some issues?
- Flexibility and Agility of RM. Effective and “successful” Risk Management functions will be significantly more flexible and agile, holistic and exploiting technology and culture to improve decision-making. ERM 3.0 was mentioned, but not defined, other than to require a more holistic approach, with ESG and the “extended enterprise” and “ecosystems” playing a key part in the evolution of effective risk management.
- US Economic Empire. This subject garnered quite a bit of discussion. The global axis appears to be realigning, with three major spheres; the US, Europe, and the BRICs (Brazil, Russian, India, China, and Africa). The desire of Iran, Russia and China to find an alternative currency for oil and other major commodity transactions may contribute to a threat to American economic hegemony. The use of sanctions was cited as a driver for countries to seek mechanisms to bypass American-controlled financial systems and currency.
- Africa. The growing strength and influence of Africa, specifically when in combination with a supportive China and the need for natural resources present in this area, might present itself as an opportunity in the coming years. Being first will certainly play a large role in both strategic and tactical roadmaps. While placed under this category, the coming risk of political strategic alliances will be something to be followed closely. Similar to the EU, there is potential for other areas to join forces to avoid being squeezed out, and global companies will need to play carefully if they are present in each territory.
- Health. One prediction was that in five years' time, we may see medical and health technologies that extend lifespans significantly. While this may or may not happen, a counterargument was presented that in five years' time, global life expectancies may actually fall, due to climate, food security, and further pandemics. Global poverty may be exacerbated by political instability and climate. While there may be great progress, there was caution that the benefits may only be available to the very wealthy.
- Reality/Virtual boundary. What information do we trust, and how can we separate “truth” from “falsehood” in information and data? What is “real”? While in part related to AI, there was more concern about the sanctity of information. What is real, what is virtual, what is “deep fake”? Will our workers and co-workers be “real”, and will our customers interact with real humans? What happens when the virtual customer “talks” to the virtual customer services rep? Is this really a five-year issue, or will we be dealing with this in 2023?
- Inter-state Conflicts/Wars/Civil wars. The “War to end all wars” ended 104 years ago, and there has been no let-up in the number of conflicts. This past year reminded us that war remains possible, indeed probable, and that it is our disbelief that leaders will resort to violence that stops us from projecting wars or conflicts, even when the evidence of impending conflict is clear to see. With this in mind, the group discusses what other wars may be possible, even probably, in the coming five years. No overt predictions were made, but potential conflicts in the Gulf region, Pakistan/India, and of course, China/Taiwan were discussed. One interesting observation was that the Second American Civil War may already have started.
- Climate impacts. While we can see climate change impacts around us already, the group was concerned that the impact will increase, with ramifications across all industries, but with a particular impact on insurance and primary production industry groups. Progress on renewables is impressive, but it will still be many years before fossil fuels are meaningfully displaced, and with them, the ongoing damage to the environment.
All our conversations are held under the Chatham House Rule, and as such, we are happy to share our thoughts openly and frankly.
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