These are the top risks for business in the post-COVID world

Over the past year, the business landscape has become much more precarious due to protracted uncertainty and confusion in pandemic response approaches, the challenges of vaccine rollouts and emerging virus variants - and spillover effects into other risks.

Businesses have had to manage dual economic and health crises, which have driven new employee and customer engagement protocols, remote working on an unprecedented scale, the re-engineering of supply chains, and numerous bankruptcies, consolidations and creative partnerships.

These developments and the long-term risk outlook have businesses wondering how to prepare for what may lie ahead. Foremost on their mind is their survival and building resilience. And not only in relation to ongoing pandemic impacts and their competitive positioning, but also recently unleashed cyber-attacks, catastrophic climate events and social unrest that demands workplace and community change.

While many businesses have innovated and adapted to rapidly-changing circumstances - seizing market share in the process - not all have. Nor will all benefit from the expected economic recovery. Businesses must be ready for a disorderly shakeout during this volatile recovery period. And they will need to strengthen and constantly review their risk mitigation strategies to improve their resilience to future shocks.

Disruption Is everywhere

Industry is facing disruption from all sides. And leaders need to closely watch three critical drivers of risk – political, technological and societal.

On the political side, business needs to be aware of the different trajectories of stimulus packages and how they may be skewed to particular sectors or business types along with the availability of credit. Small and medium-sized business, hard hit during the pandemic, may find the recovery cycle unkind as well. In the US alone, 43% of micro-, small, and medium enterprises (MSMEs) closed between January and April – and numerous others still face the potential of permanent closure.

Many governments are also increasingly shifting towards protectionism in order to create more self-sufficient and self-sustaining economies. Partly in response to COVID-19, during which border closures, lockdowns and export restrictions choked extended supply chains, companies must keep an eye on shifts in domestic policies that focus on national security and self-sufficiency. Such policies could hamper access to foreign talent and investment, as well as future merger and acquisition opportunities.

Technological drivers are also accelerating and disrupting the business landscape. The pandemic has precipitated an unheralded tech revolution for big and small businesses alike. Rapid digitalization transformed social and work interactions overnight. E-commerce, virtual conferencing, gaming and streaming all underwent unprecedented growth. It has been estimated that worldwide internet usage in 2020 increased by 30% while e-commerce grew by upwards of 20%.

This rapid digitalization also has exponentially increased companies’ cyber exposures and created more complex and potentially less secure networks. The Global Risks Report 2021, in fact, highlights the failure of cybersecurity measures as a top short-term risk. And throughout 2020, we’ve seen increasing cyber-attacks on government agencies and companies globally – many leveraged the COVID-19 crisis to infiltrate networks. Globally, the attack volume doubled from the second half of 2019 to the first half of 2020.

This monumental shift could create potential catastrophic risks on a longer horizon. The hasty rush towards automation, in response to the need for efficiency and reduced on-site labour, may expose businesses to unforeseen financial and ethical risks – particularly with more socially activist consumers and workforces concerned about job losses and willing to take their talents elsewhere.

Societal drivers are also creating real pressure on industry. Businesses are facing enhanced societal scrutiny of their practices, particularly in relation to environmental, social and governance aspects of business performance (ESG) and climate change. These priority concerns are again reflected in this year’s Risks Report, in which environmental risks dominate the high-likelihood, high-impact quadrant of the risk landscape.

More than ever, consumers, employees, and investors expect firms to reflect their values. This became apparent as the pandemic’s longer-term health, social and economic impacts manifested, as well as in the response to global social justice movements such as Black Lives Matter (BLM). For example, last summer at the height of the BLM protests, thousands of businesses stopped advertising on social media platforms. Revenue and reputation risks, and ultimately long-term value risks, are emerging over employee diversity, job security and fair pay; outsourcing, gig-work and contracting; and climate action.

Workplace and health transformations

The pandemic has transformed the needs and demands of workers and workplaces – whether in company or home offices, manufacturing facilities, shops, hospitals, distribution centres or transport. Greater experience with remote working and flexible work hours is changing expectations of how, when and where employees will work. This is challenging how firms maintain company culture, creativity, identity and the motivation of their employees.

This also has big implications for the health and well-being of employees and for society at large. Firms may suffer from productivity losses and need to more carefully manage employee safety and security challenges. This was certainly true in the early days of the pandemic, where surveys showed that 55% of employees were less productive and engaged due to remote working.

On a broader societal level, an ongoing global mental health crisis exacerbated by the pandemic and associated lockdowns has produced staggering impacts. Lost schooling, altered work conditions, job losses, isolation and the economic downturn have put all ages at risk of higher rates of depression, anxiety, PTSD, and lost productivity. The costs of worsening mental health could rise to as much as $1.6 trillion over the next 10 years in just the US alone.

Responding to truly global risks

Beyond the public health challenges of the current crisis, governments, international agencies and companies have all struggled in multiple dimensions with their response to this global risk.

All organizations can learn much from the past year. However, instead of preparing for the last crisis, they should seek to uncover transferable lessons that could apply to a range of complex, emerging threats.

Consider what was accomplished when the private and public sector came together during the crisis. We saw:

· The rapid and unprecedented development and distribution of multiple vaccines.

· A repurposing of supply chains and manufacturing processes to develop PPE and critical medical equipment.

· The ability to shift to remote and new ways of working in even the most heavily-regulated industries.

This capability to act with single-minded purpose needs to be institutionalized – the pursuit of national and global resilience is bigger than any one organization and any one risk.

More collaboration across society – the public and private sectors, communities, and NGOs – is essential. It will involve developing stimulus programs that incentivize sustainable recovery efforts that include green infrastructure and clean energy projects. It will require partnerships between the public and private sectors to upskill workers for an exploding digital economy. And it ought to necessitate the creation of new pandemic and emerging risk insurance mechanisms that could help stabilize companies during extended crisis events.

To build and maintain resilience, it is important that business keeps an eye on potentially high impact events in the short-term and on the longer-term landscape. And then be prepared to respond effectively, creatively and collaboratively. This is vital for businesses and the global community to sustainably navigate the risks and opportunities ahead, strengthen their resilience to future shocks and progress towards long-term prosperity.