Like life, death and taxes, risk is a small word that packs a lot of punch in the overall scheme of things. Some avoid it, others embrace it – but it’s an undeniable part of everyday existence, let alone the fortunes of a business.
So as an occasional observer of the business of managing risks, it’s a little puzzling that it has only just become something formally acknowledged in the world’s boardrooms, notwithstanding that everybody must have been grappling with it for a long time beforehand.
As far as I can tell, what got everybody’s attention were large scale systemic problems in the institutions that underpin the economy, which forced governments to take action and start telling companies what to do.
Added to this were some big global crises. Although the world always seems to have some form of global threat to confront, of late there are several that have added a new sense of urgency. Until this year, terrorism dominated, but now climate change is well and truly ‘front of mind’.
PricewaterhouseCooper’s survey of more than a 1,000 CEOs worldwide appears to indicate, however – and perhaps not surprisingly – that operational risks like skills shortages and regulatory burdens that directly affect profitability are what is keeping company heads up at night.
But even though that survey only came out in the last month, I suspect if they took it again now, that threat of climate change would rank significantly higher.
This month, the evidence was handed down from the Intergovernmental Panel on Climate Change (IPCC) that there is a 90 per cent probability that we are the ones largely responsible.
As PwC found, like the population in general, many companies are not so much ignoring the problem as overwhelmed by the enormity of dealing with it. In the short term, the costs of addressing the threat also appear to outweigh the benefits.
Until very recently, this was the view taken by Prime Minister John Howard, but, like the dire predictions for the climate, he appears to have reached his own ‘tipping point’ and realised that we have to drag ourselves out of the here and now and look at the consequences of our actions.
As always, though, he is leading from behind, with a host of business leaders, not to mention the electorate, several months ahead.
Perhaps this time Howard’s taken the lesson he learned from Paul Keating about not getting too far ahead of public sentiment beyond its logical bounds, but like risk, at least something as all-encompassing and vital as the atmosphere of the planet is now receiving the attention it deserves.
-Acting Editor, Shaun Drummond