In climate change, the occurrence of extreme

In order to effectively do business, one
needs to know what risks one faces, and stay informed on how these change with
time. As South Africans, we are particularly interested in our national and
regional risks, but also the global ones, as we are part of the larger
community.

 

Front-of-mind in South Africa (SA) at the
moment is the severe water shortage in the Western Cape. This risk ties in with
general resource shortages and changes, which are linked to, and influenced by,
the broader category of environmental risks – including climate change, the
occurrence of extreme natural disasters and weather events, and biodiversity
loss, to name a few – which are exacerbated by slow and ineffective mitigations
implementation. Environmental risks have been globally rated as above average
in terms of likelihood and impact (World
Economic Forum, 2018) and dominate risk discussions globally. SA also faces
such general environmental risks, but may have other, more pressing, issues to
focus on at the moment.

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Many profit-driven businesses have a
negative influence on environmental risks, as there are currently few
incentives for capitalist and competitive firms to make investments to change
behaviours and contribute to environmental conservation. Conversely, there are
some businesses and industries that take a more sustainable approach, realising
that they will not be able to continue doing business without a healthy natural
environment and sufficient natural resources. Such firms do indeed take
measures to mitigate this group of risks.

 

Another risk facing both the global and SA
communities is economic uncertainty. In SA this is driven largely by political
risks, including corruption and new ANC leadership, which influence foreign
investor confidence and the Rand strength, which in turn influence structural employment
and fiscal crisis risks. Globally and
locally, however, the past decade’s bull-run in the markets is creating
complacency regarding general economic risk – generating another risk – and, as
markets operate in cycles, an imminent swing to a bear market is possible. Further
adding fuel to this risk of bull-to-bear flip are global unsustainably high
asset prices and debt levels.

In SA specifically, businesses may be able
to have a positive influence on economic outcomes through public-private
working groups and similar ad-hoc consultative groups. It is true that business
working groups have taken a back seat since President Zuma came into power;
however, these groups can still significantly influence government and policy.
An example would be the current political landscape, in which issues of state
capture and patronage are rife. Business was able to step in during the firing
of Finance Minister Nene and contribute immensely to the reappointment of
Pravin Gordhan, thereby stabilising the economy and the Rand.  

 

Student
and worker protests, collectively relating to social instability, are becoming
more prevalent and are linked to increasing wealth and income disparity. In SA,
this could be seen to be a result of political instability, but globally it may
result more from automation, artificial intelligence technology and robotics
creating occupational and income uncertainty, as well as actual unemployment.
This may create fragile societies prone to social discontent.

Business
could be seen to have a negative impact on this risk, as the hunger for profits
leads to more widespread adoption of technology to replace manual labour.
Furthermore, SA businesses exacerbate this issue by remunerating executives at
a rate of 21 to 36 times higher than average employees (BusinessTech, 2016).

 

Also as a
result of the world becoming more digital, is an escalation in cybercrime. As
stated by the World Economic Forum’s Global Risks Report for 2018, “Attacks are
increasing, both in prevalence and disruptive potential. Cyber breaches
recorded by businesses have almost doubled in five years, from 68 per business
in 2012 to 130 per business in 2017.”

Due to
the expense and potential reputational damage that can result from such
cybercrime, we believe that businesses will drive innovation and make
investments in this space, thus having a positive and mitigation impact on this
risk. It will be in their own best interests, financially and otherwise, to do
so.

 

Lastly,
global conflict is a risk to all. Far-right and populist political parties and
ideals are gaining in strength and popularity, and many nations disagree on how
regions and the world should be governed – and how general global risks should
be addressed, if at all. Increasing nationalism is causing rifts between
nations which increases the likelihood for global conflict. The use of nuclear
weapons is also a related risk and would have irreversible and devastating
effects on everyone and everything. 

 

To
conclude, the risk universe in SA and the world is vast and is populated with
new risks, never before seen. As humans, we are not very good at addressing
such unknown issues. However, governments, businesses and communities will need
to pull together to carve out a way to keep going by mitigating these risks, or
by effectively dealing with the potentially devastating consequences.