THE BLOG
09/01/2016 03:00 pm ET Updated Sep 02, 2017

Global Risk is Spinning Out of Control

The recently completed work of the Anthropocene Working Group, a group of scientists studying the advent of a new geologic age - the Anthropocene - went largely unnoticed until recently. The Anthropocene era, which is broadly defined by how man-made factors impact the environment, has been in existence since the dawn of the Industrial Age. The Anthropocene has not only become associated with climate change, but other forms of man-made risk, such as cyber risk and terrorism, which have come to define a global risk management landscape that is slowly spinning out of control.

The evolving predominance of man-made risk does not suggest that natural risks are declining. They are, rather, colliding in some unpredictable and harrowing ways, which risk managers and decision makers are generally not prepared for. Natural risks are characterized by caprice. Naturally occurring earthquakes and hurricanes, do not plot when and where they will strike. Man-made risks, on the other hand are defined by agency, wherein a proximate cause that triggers an event, such as fracking, which has made Oklahoma the earthquake capital of the world. Man-made risks have subjected the world to the law of unintended consequences.

Unforeseen and unanticipated risks are becoming more frequent, less predictable, and are having a greater impact on more people at one time. Here are a few recent examples:

  • Unusually dry conditions in Canada enabled someone to start a forest fire that decimated a town (Fort McMurray) at the epicenter of the country's oil sands industry, prompting 25% of Canada's oil production to be temporarily taken off line, and impacting global oil prices.
  • The widespread use of fungicides has greatly reduced the effectiveness of the world's few anti-fungal agents, meaning that as many people now die from fungal infections as from malaria.
  • Syrians were migrating en masse from rural areas to cities well before the Syrian Conflict was born because of drought. The Conflict has only exacerbated the reasons for their displacement.
  • Zika's spread has already impacted tourism and travel patterns globally, with severe knock-on effects for businesses and people who depend on tourists for their livelihood.

Such unforeseen events are becoming almost as routine as the latest Islamic State attacks,- which did not exist 5 years ago, but have today become an indelible part of our daily lexicon. The world is becoming desensitized to the frequency and severity of unanticipated risks, as if they are just a daily fact of life.

Decision makers have generally not spent enough time focusing on the implications of the Anthropocene. Part of the slow response, among otherwise robust organizations, is that the risk management and decision making frameworks they rely upon largely belong to a bygone era. The muscle memory for how organizations respond to risk is reflexively oriented toward avoiding (or occluding) risk at all costs, rather than to meeting them head on, even as the costs associated with not doing do so are rapidly rising. If risk managers and decision makers do not discover a way to get ahead of these risks, a pivot point will soon be reached; man-made risks will consume us and overwhelm our ability to manage them effectively.

The risk management modus operandi needs to change from blissful ignorance to keen awareness, rejecting reactivity and toward embracing proactivity. By the same token, shareholders and consumers should set a new bar of awareness vis-à-vis man-made risk, and integrate a willingness to do something meaningful about it. We no longer have the luxury of presuming these risks are someone else's problem, for they are now determining how we all live our lives. This will require thought leadership, the devotion of many more resources to combat these issues, and a sustained effort aimed at combatting them - at all levels of society. Man-made risk is everyone's problem, is on all of our doorsteps, and will require our best effort to combat its ill effects.

*Dante Disparte is CEO, and Daniel Wagner is Managing Director, of Risk Cooperative. They are the co-authors of the new book "Global Risk Agility and Decision Making".