Compared to previous years, global risk awareness has shifted from the economic to the environmental. With a view to the next ten years, half of the top 10 risks are concerned with effects stemming from climate change, environmental damage, biodiversity loss and resource crises.
International risk mitigation efforts are comparatively advanced in areas concerning trade, crime, and the financial system, yet they are perceived as insufficient in areas of AI, biodiversity, and climate change.
How companies can take advantage of megatrends
When companies invest, they need to consider and compare local and national regulations to evaluate the potential success of doing business in a country. Recent developments such as the rise of autocracies and trade conflicts make it clear that these assessments of the regulatory business environment are very important and must continue once active in a country.
Companies are faced with increasing scrutiny from a variety of stakeholders concerning the way they run their businesses – at home and abroad. To avoid potential pitfalls, companies need to be clear as well as consistent in what they are saying and what they are doing.
Beyond legal compliance, standards, self-regulatory codes of conduct and guidelines, having evolved from industry bodies and associations, are of high importance. Companies should contribute to such bodies to define standards, particularly in areas where frameworks are only just emerging or are facing an overhaul.
For companies, dealing with risks starts with risk awareness, how risks relate to their business activities, and the ability to develop a strategic risk response. Improved risk management capabilities make companies robust and open up opportunities that arise from risks.