Businesses must face up to risks beyond the pandemic

There’s no question what has occupied the majority of attention for risk managers during 2020. But Healix International, believes the all-consuming consequences of the pandemic could leave governments and employers exposed to other risks in 2021.

The annual Healix Risk Oracle report has highlighted key areas of risk – besides the continued impact of COVID-19 – that it believes need to be recognised by risk managers in 2021. As Chris Job, Director at Healix International explains, it is vital for organisations with employees heading back overseas as the much anticipated vaccine programme rolls out, to ensure that the myriad of other risks remain a focus.

“2021 is likely to be as busy a year for challenging global events, some predictable and some unprecedented. Overlay this expectation with a new and as yet undefined normal and a global drive for economic growth, the need for robust organisational resilience plans is clear. Alongside the pandemic, more familiar risk factors have remained relevant.”

Political Risk

Healix International risk analysts believe that COVID-19 has aggravated the steady decay of the ‘social contract’. Longer-standing drivers include mounting frustrations over inequality, cynicism of perceived corrupt political elites, and distrust of wider civil society including the media and big business amid the preceding pandemic of ‘Fake News’.

Another enduring political risk trend by Healix International relates to the erosion of domestic political cohesion by tensions between the ever polarising left / right political dichotomy. And the real front lines can be found online. Whether it has been by design or incidental, social media has become an incredibly effective political weapon. Complex political issues find themselves being misrepresented in the form of a ‘post’, ‘share’, or ‘tweet’. This dynamic will become more prevalent in 2021 and result in even more social and political divisiveness, with rising levels of political risk in locations where the ‘culture war’ is most pronounced.

Security Risk

For three years, Healix International has placed natural disasters as the leading security risk factor, and this is unlikely to change going forwards. Natural disasters are becoming more pronounced both in terms of frequency and severity. Building resilience to natural disasters is a significant exercise. Still, meteorological and geological trends can be helpful when it comes to arranging insurance cover, developing scenario-specific plans and supply-chain contingencies.

The second security risk factor is derived from the correlation between worsening socio-economic conditions and myriad low-level security threats. Lockdowns, societal disruption and economic hardship are certain to persist into 2021. However, the full socio-economic and psychosocial implications of the pandemic are likely to play out over a much longer timeframe. Healix believe a broad range of threat actors will benefit from discord, including criminals, terrorists and violent political groups as well as a comparative increase in crime and incidents of violence perpetrated by ‘faceless’ lone actors.

Operational Risk

COVID-19 exposed a number of vulnerabilities in terms of organisational resilience. One of the most obvious was that of supply chain disruption. The highly complex logistical webs that make up the global economy have predominantly been designed with cost and efficiency in mind. Unless resilience starts to be factored into these considerations, disruption to supply chains will remain a significant operational risk factor.

The other big operational risk is cyber criminality which continues to have exponentially increasing relevance to businesses. The working from home ‘normal’ that emerged during 2020 opened up a sea of opportunity for cybercriminals, who are attempting to exploit the pandemic by deploying new and innovative online threats. All organisations need to take these threats seriously; cyber-attacks are no longer just an inconvenience; they are potentially calamitous.

[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The pandemic has triggered a paradigm shift in the industry and spawned the need for a new way of thinking.[/perfectpullquote]

The report concludes, of the many COVID-19 clichés heard in 2020, the one that seemed most popular in risk management circles referred to the pandemic as an ‘unforeseen’ or ‘once in a lifetime’ event. What has followed is the suggestion that the pandemic has triggered a paradigm shift in the industry and spawned the need for a new way of thinking. However, we do not believe that the pandemic is a fundamentally game-changing event which justifies a radical shift in approach.

While the impact of the pandemic will drag on for many months, the report suggests that risk managers must find the time to take stock of the learnt experience. Now is the time for reflective consideration of the organisation’s performance and learning from those lessons. This will better equip risk managers with the tools required for their primary purpose; making the right decisions on the basis of good intelligence and equipping organisations with the tools they need to adapt in the face of changing circumstances.

The 2021 Healix International Risk Oracle Report, along with a global Security Risk Map, can be downloaded here.

Image:Healix International