Global Business Risk In Focus

As we have seen time and time again, from impact of international crises to far-reaching consequences of national political events, we live in a highly integrated global economy.  Such international markets are volatile and promise ample opportunity moderated by a variety of global business risks.  We decided to learn more about these risks and connected with two experts on international risk management: Dante Disparte and Daniel Wagner. Mr. Disparte and Mr. Wagner are CEO and Managing Director, respectively, of Risk Cooperative, a strategy, risk and capital management firm focused on mid-market opportunities, market expansion and innovation on a global scale. They co-authored “Global Risk Agility and Decision Making, Organizational Resilience in the Era of Man-Made Risk”, a book released in 2016.  They are also frequently featured in leading media publications such as the Harvard Business Review, Huffington Post and International Policy Digest.

Below are Mr. Disparte's and Mr. Wagner’s answers to our questions:

1. Tell us a little bit about your background. How did you come to be thought-leaders in the field of risk management and country risk?

We are both RISK practitioners who are passionate about accelerating risk management to keep pace with accelerating global change. Whether it is the blinding pace of technological innovation, dislocations in global economic output or how organizations confront complex risk, we believe this is a global priority.While Daniel developed his expertise in the large financial services world, at such notable organizations like AIG and GE, and at multilaterals such as the Asian Development Bank and World Bank Group, Dante’s path to risk management leadership was honed through hands-on general management and the global insurance brokerage world.

2. What is Global Risk Agility and why did you decide to cover this topic?

Global Risk Agility is principally a management framework aimed at changing the way organizations -- particularly senior leaders -- think about risk. Rather than making risk an object of “passive control” and something to be feared, we aim to make risk an object to be understood – clearly with a healthy dose of respect – and properly harnessed. There is a risk in doing nothing at all in these turbulent times. We would argue that organizations, large or small, can no longer afford to remain on the side lines.

3. How is man-made risk relevant to the business owners and boards of major corporations?

Man-made risk, such as cyber risk, physical security threats, and climate change, among others, are the central driving forces in the global threat landscape. Unlike natural risk, which are still very much a central theme, man-made risks have agency. Simply put, a tornado does not pre-plan where and who it will strike. A cyber-attack, by contrast, is, in most cases not a random event. While large organizations can often shield themselves from the financial consequences of many risks, the reputational harm, as we’ve seen with countless examples, can irrecoverably erode market share and stakeholder trust. Small to mid-sized enterprises confront these challenges as a real existential threat.

4. How does the company’s decision making on risk need to change in the current risk environment?

First and foremost, organizations are far too passive. Risk does not wait for a board to have a quorum among its members before it strikes. Risk also does not recognize the annual planning, strategy or budgetary cycles that are the drumbeat of large enterprises. Too few of these organizations, particularly publicly-listed firms, are marching to the drumbeat and, therefore the short-termism of the stock market. In the era of man-made risks, decisions need to be framed around longevity and optimization, as opposed to short-term performance and maximization. It is through this and only this that organizational resilience and a spirit of collective survival will take hold.

5. You’ve authored a widely read Harvard Business Review article on the “Enterprise Value of Data”. How does that topic relate to your Global Risk Agility and Decision Making work?

The concept of Enterprise value of Data (EvD), is something we introduced in part to change the way people think about how their organizations monetize data and therefore what economic value or goodwill can be ascribed to it. In a risk management application, when you think about persistent cyber-threats and ransom attacks, which are increasingly holding entire business models hostage, the value at risk goes far beyond insurable losses. We use the example of Delta Airlines' worldwide systems' shutdown to drive home the point that when it comes to cyber risk, businesses and therefore the global economy are woefully under hedged.

6. What are your predictions for global risks of 2017 most likely to impact North American businesses?

If 2016 was the year of cyber risk maturity – in that there is not an organization in North America that is not sensitized to their exposure, 2017 will be the year of decision opacity. In other words, decision makers from large and small enterprises and across sectors will be confounded by a world that is increasingly difficult to read and, therefore, to make long range plans for inventory, investments, hiring, and market expansion, among others. The only thing that keeps us awake at night more than risk, is uncertainty. Risk you can measure, but uncertainty can not be measured. Uncertainty creates bank runs, erodes consumer and investor confidence and trust in counter-parties and institutions. 2017 will mark a period of intense uncertainty.