Firm and lasting commitment to risk management only way ahead: Baron

Business leaders the world over need to accept that the perma-crises of the current day are here to stay and, if anything, will accelerate and intensify to demand full and lasting acceptance of the need for true enterprise-wide risk management, according to Franck Baron, outgoing president of the Pan-Asia Risk & Insurance Management Association (Parima).

Baron, who is risk manager for Singapore-based International SOS and the new chairman of the International Federation of Risk & Insurance Management Associations (IFRIMA), used his last speech as president of Parima at its recent Tokyo event to look into an uncertain future that needs to be risk managed carefully.

“The coming years will inevitably be marked by an upsurge in new risks of unprecedented scale (social inequalities, geopolitical confrontations, cyber threats, unexpected technological breakthroughs, the consequences of global warming and the demographic explosion, etc) that will thwart forecasts,” said Baron.

“It would be a major mistake to try to channel them or pretend they don’t exist. The only way to prepare for them is to encourage the emergence of a culture of risk management and risk learning in each and every one of our organisations,” he continued.

Baron stressed that Parima firmly believes that only companies that practice sound risk management are sustainable, and called for positive adaption to the dynamic environment in which we all live and work.

“These shocks present us with a choice between two types of adaptation: either we carry on as before, protecting ourselves further, or we do things ‘differently’ – let’s call it ‘positive’ adaptation – regarding our agricultural practices, our territorial planning, our management methods, our extra-accounting standards,” said the founder of Parima.

Baron noted that some describe our distressed world in terms of the VUCA acronym – Volatile, Uncertain, Complex and Ambiguous. Others, such as the futurist Jamais Cascio, find the term obsolete, referring instead to “an age of chaos” in which the world is BANI – Brittle, Anxious, Nonlinear and Incomprehensible.

“Today, in many ways, the planet is fragmented and divided. We have lost sight of its uniqueness, creating lands of risk by ignoring its fragilities, its limited resources, and by thinking in terms of ever-increasing globalisation without preserving the richness of the common good,” he said.

The theme of the Tokyo event was Adapting to Permacrisis. Permacrisis is a situation where different risks collide, and their interdependence is strongly felt. “The word certainly is an apt descriptor of the state of the world,” said Baron.

“High energy prices, supply chain issues, inflation, geopolitical conflicts, pandemic impacts, climate change, natural catastrophes and cyberattacks all seem to be combining to create one big, interconnected mess,” he said.

Baron said that climate change is here and there are several other natural cycles that are largely “out of whack” – including water and biodiversity.

These shocks demand that critical choice between the two types of adaptation: carry on as before and raise levels of protection, or take the positive adaption route, particularly in areas such as agricultural practices, territorial planning, management methods and extra-accounting standards.

“These shocks are making us aware once again of our absolute interdependence with living things, in all their forms. They urge us to make its protection, and above all its development, the priority of all our actions, within our companies, our communities and our territories,” said Baron.

The evolving nature of the risks faced by organisations of all shapes and sizes presents serious management challenges, stressed Baron. Companies are exposed to global and exceptional risks whether singular, such as infrastructure or supply chain, or systemic, such as climate, cyber and health.

Baron stressed that the lessons of the Covid-19 period should not be forgotten and health needs to be taken more seriously at all levels.

“Over the past three years, the Covid-19 pandemic has highlighted the vulnerabilities of healthcare systems worldwide and highlighted the dangers of inequalities in not only creating global health risks, but also impacting on geopolitical tensions and economic risks,” he said.

“Whether it’s the security implications of mass migration, the closure of societies affecting people’s ability to work, or the health consequences of climate disasters, recent years have demonstrated that health is linked to the stability and prosperity of countries,” continued Baron.

“And even if the immediate impact of Covid-19 has passed, countries will need to prepare for the pandemics we know are on the horizon, including non-communicable diseases, which cause more than seven out of every ten deaths worldwide,” he advised the Parima risk managers gathered in Tokyo.