Essay

Risk Governance and Resilience: New Approaches to Cope with Uncertainty and Ambiguity

By Ortwin Renn and Andreas Klinke This chapter will address the major functions of the risk governance process: Each of these stages is described in the light three aspects of resilience: adaptive management capability, coping capability, and participative pre-estimation, interdisciplinary risk estimation (including scientific risk assessment and concern assessment), risk characterization and risk evaluation, and risk management, including decision-making and […]

How to confront uncertainty in your strategy

By Chris Bradley, Martin Hirt, and Sven Smit | McKinsey&Company Lack of certainty about the future is the very reason you need a strategy. Instead, embrace probability. “Predictions are difficult, especially about the future,” quipped Yogi Berra (and, before him, physicist Nils Bohr). This rings especially true for those trying to run a strategy process. Uncertainty is not only everywhere in […]

Catastrophic risks: How can we assess and manage them?

By Ortwin Renn, Klaus Lucas, Armin Haas, Carlo Jaeger. Institute for Advanced Sustainability Studies.  Many catastrophic risks are major threats to the wellbeing of society. Such risks are called systemic risks. They threaten the functionality of vital services to society such as electricity production, water supply, climate stability, cyber security and amny others. With the assisatnce of complex models we may […]

A new posture for cybersecurity in a networked world

Source: McKinsey&Company. By Thomas Poppensieker (Munich) and Rolf Riemenschnitter. As the dangers mount, current approaches aren’t working. Cyberrisk management needs a root-and-branch overhaul. Until recently, financial firms and governments were the primary targets of cyberattacks. Today, with every company hooking up more and more of their business to the Internet, the threat is now universal. Consider the havoc wreaked by three recent […]

It’s time for a new social contract

Source: World Economic Forum. Democracy is becoming collateral damage in a world where global risks have been ignored or exacerbated by those with the power to act. The increasing authoritarianism of elected leaders, the actions of entrenched dictators, and the use and threat of military power have brought us to the edge of full-blown crisis. 2017 was a year of […]

‘Resilience-in-action’ is key to team success

By Kathleen Sutcliffe* The backwoods and business offices seem worlds apart. But a sport in which competing teams navigate wilderness courses using hiking boots, mountain bikes, and boats has provided a Johns Hopkins University researcher with a context for studying how organizations handle adversity. Whether in the wild or in a corporate tower, teams that practice “resilience-in-action“—not just bearing the […]

Strategy under uncertainty

By Hugh G. Courtney, Jane Kirkland, and S. Patrick Viguerie, June 2000,McKinsey&Company. The traditional approach to strategy requires precise predictions and thus often leads executives to underestimate uncertainty. This can be downright dangerous. A four-level framework can help. At the heart of the traditional approach to strategy lies the assumption that executives, by applying a set of powerful analytic tools, […]

Public-private partnerships

By John O’Dea*,  Timesofmalta.com. The PPP Knowledge Lab defines a PPP as “a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance”. A fundamental feature in PPP is that normally the government does not own the infrastructure, […]

Understanding extreme sea levels for broad-scale coastal impact and adaptation analysis

Source: Nature. Authors: T. Wahl, I.D. Haigh, R.J. Nicholls, A. Arns, S. Dangendorf, J. Hinkel & A.B.A. Slangen One of the main consequences of mean sea level rise (SLR) on human settlements is an increase in flood risk due to an increase in the intensity and frequency of extreme sea levels (ESL). While substantial research efforts are directed towards quantifying […]

Getting Chief Executives to Take Cyber Risks Seriously

Source: Council of Foreign Relations. CEOs and their boards of directors should pay more attention to the cybersecurity risks that could devastate their business…. To convince board members and CEOs to act, they must first be convinced of the acute consequences of failing to implement proper cybersecurity measures. “Properly assessing these risks and allocating resources require informed decision-making by a company’s […]

Resilience, from an adaptation strategy to an economic asset

By Oliver Wild, Veolia. Giving the tools to a city to help make it more resilient to extreme events… Veolia’s resilience approach consists of understanding the vulnerabilities in a particular territory and then mitigating them to more effectively – and more quickly – bolster its ecosystem and consequently develop a favourable social and economic context. Strongly linked to sustainable development, […]

Board of Directors Oversight of Leadership Risk

Source: The European Financial Review. The practice of Enterprise Risk Management [ERM] was born as a consequence of the Enron collapse in 2001… Leadership is an organization’s most central risk Rarely is leadership elevated to the level of a risk “hot topic” in the minds of Boards or their primary committees… Figure 1, Risk Hot Spots, adapted from KPMG presents […]

Stress testing for nonfinancial companies

Source: McKinsey&Company. Assessing a company’s vulnerability to risk makes otherwise theoretical discussions of strategy more real. In the decade since the global financial crisis, financial companies have honed their ability to measure risk in a way that nonfinancial companies have not. Granted, nonfinancial executives hadn’t faced the same existential crisis. And they’ve seldom come under the same kinds of investor […]

Risk Management in the very heart of 4IR

Source: G20 Insights. PricewaterhouseCoopers outlined ideas to enable a sustainable Fourth Industrial Revolution. How G20 countries can create the conditions for emerging technologies to benefit people and the planet. “The Fourth Industrial Revolution (4IR) offers huge potential to transform and realign our economies and societies. There is an increasing realisation that the 4IR could also exacerbate problems for people and the […]

The Dutch Have Solutions to Rising Seas. The World Is Watching.

By Michael Kimmelman, New York Times.  In the waterlogged Netherlands, climate change is considered neither a hypothetical nor a drag on the economy. Instead, it’s an opportunity. “It is, in essence, to let water in, where possible, not hope to subdue Mother Nature: to live with the water, rather than struggle to defeat it. The Dutch devise lakes, garages, parks and […]

Leadership failures

By John O’Dea. We in Europe believe that our democratic system provides the foundation for a great set of principles and values that lead to good public governance. Public leadership is embedded within this, at least we think it is fair to say we ‘believe’ this. One might even say we have believed this for a long time since democracy […]

Distortions and deceptions in strategic decisions

Source: McKinsey Quarterly, by Dan P. Lovallo and Olivier Sibony. Companies are vulnerable to misconceptions, biases, and plain old lies. But not hopelessly vulnerable. The chief executive of a large multinational was trying to decide whether to undertake an enormous merger—one that would not only change the direction of his company but also transform its whole industry. He had gathered his top […]

Strategic Disaster Planning

Source: ICMA. Those who work with communities in the aftermath of natural disasters see the importance of advance planning firsthand. Disaster plans save time, money, headaches and, ultimately, they can save lives. In short, planning makes disasters less disastrous. And yet, it can be difficult for communities to prioritize disaster planning, particularly for those with limited time, budget, or staff. […]

Climate change: global reshuffle of wildlife will have huge impacts on humanity

Source: The Guardian. Mass migration of species to cooler climes has profound implications for society, pushing disease-carrying insects, crop pests and crucial pollinators into new areas, says international team of scientists. Global warming is reshuffling the ranges of animals and plants around the world with profound consequences for humanity, according to a major new analysis. Rising temperatures on land and sea […]

The evolution of model risk management

By Ignacio Crespo, Pankaj Kumar, Peter Noteboom, and Marc Taymans. McKinsey&Company An increasing reliance on models, regulatory challenges, and talent scarcity is driving banks toward a model risk management organization that is both more effective and value-centric. The number of models is rising dramatically—10 to 25 percent annually at large institutions—as banks utilize models for an ever-widening scope of decision making. […]

The Risk of Leadership

A plea for a new search for modern leadership. By Jack Kruf Yes, we have our democratic system as a great set of principles and values for good public governance. Public leadership is embedded in this, at least it should be. You may expect excellent results, because the democratic system traces back to the Greek δημοκρατία 508 BC. From there […]

Nonfinancial risk today: getting risk and the business aligned

By Joseba Eceiza, Piotr Kaminski and Thomas Poppensieker, McKinsey&Company. Ask senior managers at any company if they have nonfinancial risk under control, and the answer is likely to be yes. But as managers of companies in automotive, banking, oil and gas, pharmaceuticals and many other sectors can attest, the reality is often very different. And as personal liability for corporate actions […]