Surviving and Thriving in a Volatile Business Environment

The world’s first global Chief Heat Officer (CHO) was appointed on 27 June 2022. Eleni Myrivili, who had been serving as Athens’ Chief Heat Officer since 2021, took on the global role with UN Habitat to advance heat response and resilience measures in cities around the globe.

Even 10 years ago, who could have imagined that one day organisations would be appointing Chief Heat Officers? Yet here we are.

Last week Myrivili was interviewed on BBC World about the heatwave that is gripping parts of Europe. She commented that temperatures in many countries, including Italy and Greece, are reaching 10 degrees above average. This is having crippling effects on individuals, communities, and organisations.

In some parts of Australia, changes to weather patterns and the associated weather events are wreaking havoc. The effects are felt not only physically but financially and psychologically. Anyone who holds an insurance policy for home and contents will be able to tell you the significant impact on premiums  – for many people they are no longer able to even obtain insurance cover because of their location.

Globally, climate is only one area where dramatic change and volatility is being experienced. Be it geo-politics, the economy, AI, culture, or disruption to longstanding business models, we are experiencing dramatic change at a rate unprecedented since World War II. How can organisations survive in such a volatile environment?

There are three imperatives for organisations wanting to improve the likelihood of survival in a volatile environment.

1. Expand your risk management to consider a broader range of external strategic events and what potential impacts they might have on your organisation.

Effective risk management and planning are critical in a volatile environment. Many organisations have been too conservative in their approach. You need to be thinking broadly and globally about the nature and source of the risks that might impact your organisation.

What impact might an invasion of Ukraine have on your organisation? Threats to shipping in the Gulf of Aden and Red Sea? A 10-degree temperature increase next summer? Interest rates remaining high next year? The economy moving into a recession? Another pandemic?

Is your risk management and planning adequate for the volatile environment? Smart organisations will be reviewing this regularly.

2. Look past the horizon when managing risk.

The velocity of unwanted events and change has caught many organisations by surprise. For some, it has caused their demise.

To use a boating analogy, you need a longer-range radar so you can identify threats earlier. Successful organisations will be looking further ahead to identify emerging risks, evaluating their velocity, and considering when those risks might impact the business.

If you are like me, you will remember when you first heard about COVID-19. You will also remember how quickly it became a major global issue.

Smart organisations will be extending the horizon of their risk management.

3. Engage with opportunity risk; it can be the upside of volatility.

Most organisations only evaluate and manage risks that pose a direct threat to the organisation. Every threat, however, also provides an opportunity. The two are not mutually exclusive.

Currently, many people in Europe, and around the globe, are focused on EURO 2024, the UEFA European Football Championship. There are two key elements in a football game – one, defense where you are trying to prevent the other team from scoring a goal against you, and two, offense where you are trying to score a goal. A successful team requires both effective defense and offense strategies. If your organisation is only playing defense, i.e. managing threat risks, then you are potentially missing valuable opportunities. Smart organisations are also actively managing opportunity risk and capitalising on the opportunities that arise in times of volatility.

There is one certainty for the short and medium-term domestic and international outlook – volatility is not going anywhere anytime soon. The survival of any organisation can never be guaranteed but there is much that can be done to improve its chances.

Smart organisations are taking proactive steps to not only survive but thrive in a volatile environment. Leaving it to chance is not an option.

What is your organisation doing?

ZANE EDWARDS
Global Director – GRC
Specialist Focus – Risk, Policy, Finance