Geary W. Sikich looks at the emerging business and political risks which organizations need to be aware of and make plans for.
It is December 16th 2015 as I write these lines. Today is Beethoven’s birthday, we are at the yearend and as Christmas approaches it is time to look at what 2016 may bring us. How well will we do, or, how poorly will we perform when, and if, unplanned for crises emerge from threats that we continue to overlook?
My top picks for threats, emerging crisis issues and high impact risks in 2016 and their current status are:
Radical movements
“[T]he current approach — in which the United States and its allies… seem to be trying to fight the Islamic State without actually fighting — is not only doomed to failure but also likely to have dire … effects.”
David Kilcullen, former Chief Strategist for US State Department Counterterrorism Office of the Coordinator.
The rise of radical movements, such as ISIS / ISIL / IS, have begun to exert their violent influence on a worldwide basis. No longer is the threat posed by radical movements confined to a geographic region. After the recent attacks in Paris and San Bernardino, the world is finally starting to realize the threat of ISIS and other radical movements. Displaced persons, refugees and migrating populations put a burden on host nations and offer radical groups a means of infiltration.
We see little of substance in terms of action; and a lot of rhetoric from government in the affiliated countries that is meaningless to the radical movements. 2016 should see an uptick in violent expression by radical groups across the globe. For the US, the tinderbox will be the elections in November, but events will start to occur long before, as the campaigning gets into full swing.
Sovereign debt
Worldwide sovereign debt and government spending by many nations is out of control. As interest rates rise how will governments deal with the debt issue? From a continuity planning perspective this should be a concern as potential debt defaults will have a direct impact on budgets, profits and stability. 2016 should see increasing concern regarding sovereign debt, especially in the USA with elections in late 2016.
Climate change
An accord was recently signed regarding climate change and politicians proclaimed that this was a watershed event for the earth’s 7 billion+ people. The Paris climate conference ended with smiling faces and calls for change. However, 2016 will not see any dramatic change in the way nations, industries and people deal with climate issues. Studies will continue, alarms will be raised, but little in the way of reduction of greenhouse gases will actually take place.
Commodity prices
Oil, natural gas, gold, silver, corn, soybeans, pork bellies, etc. all have seen significant price shocks in 2015. Energy being the commodity that has made the biggest splash news-wise. Yet, in the US we have seen very little movement in the prices for commodities, such as, food, fuel, etc. The Consumer Price Index in the US is carefully manipulated in order to produce inflation numbers that are questionable. 2016 should bring some shocks when commodity prices begin to rise, especially if there is a sovereign debt default and a rebalancing of the world’s reserve currency.
Cyber threats
Stories of cyber-attacks, data breaches, new viruses, etc., are becoming commonplace. Actions taken to defend against these threats seem to always be a step behind the next attack. 2016 should see an increase in nation-state cyber-warfare, criminal activity and privacy erosion.
World markets / economy
We continue to hear of recovery, however, if you do a quick survey of colleagues, co-workers, recent college graduates, older workers, retirees, etc. the discussion generally paint a bleak picture. Seems that the only ones doing well are the pundits and the ‘talking heads’ presenting the nightly news – all smiles and good cheer. 2016 should see market and world economic swings as inflation, deflation and uncertainty over interest rate hikes continues to befuddle investors, savers and economists. China will continue to exhibit ‘false positives’ and India, Brazil and Europe may surprise.
Infrastructure
Worldwide infrastructure requires a rebalancing and revitalization in order to maintain its ability to support life in the 21st century. Using the US as a barometer and Europe, Russia as classic examples of infrastructure that is virtually falling apart, with less and less spending being allocated to repair, upgrade and replace; we may see sustainability of services becoming more of an issue. In addition, the susceptibility of infrastructure to electromagnetic pulse (EMP) attack and lack of effort to remedy this situation; infrastructure has the sword of Damocles hanging suspended, ready to drop. 2016 may see a major infrastructure outage due to the above factors and the combined effect of erratic climate cycles.
World health
Communicable diseases – Ebola, H1N1, H5N1, H7N9, etc. still have the potential to erupt into global pandemics. The World Health Organization (WHO) and Centers for Disease Control (CDC) have grown quiet since the Ebola scare in the US and the pandemic that was declared for H1N1 several years back. What has happened to the stockpiles of medicines that we were told would be available in the wake of a pandemic? For that matter, what has happened to the plans that were created to prepare for pandemics? 2016 could see a major outbreak of a communicable disease, such as influenza, beyond the normal seasonal trends, again due in part to erratic climate effects.
Geo-political instability
Syria, Iran, North Korea, Somalia are immediately associated with geo-political instability and a threat to neighboring nations. The conflict in Syria continues to grow worse; already seeing Russia, Turkey, the US and EU allies drawn in. North Korea continues to threaten peace in Asia with the threat of an action against its partitioned neighbor to the south. Iran has promised to ‘play nice’ and stop development of nuclear capabilities, but what oversight is being implemented to insure that they stay within the current accords? India has announced that they are constructing a ‘secret city’ to produce nuclear weapons. Somalia continues to shelter pirates (a lucrative business) and provides a business model for pirates operating in Southeast Asia, Nigeria and other parts of the world. 2016 may see the escalation of the Syrian Civil War with global consequences as the potential to contain the conflict with the current geographic area erodes. North Korea, Pakistan, India all represent ‘wild cards’ in the world geo-political arena.
Economic
Can you spell ‘CURRENCY WARS’? The ground is fertile as countries devalue their currencies in an attempt to be more competitive. There is a quiet currency war taking place that the media has yet to give much coverage to. The IMF recently introduced the Chinese Yuan (Renminbi – people’s currency) into its basket of currencies, displacing the US Dollar somewhat as the global reserve currency. Rumors have it that the Yuan will in the next couple of decades become the recognized reserve currency, displacing the US Dollar, much as the US Dollar displaced the Pound Sterling after World War 2. The implications are staggering for worldwide economies and would have a major impact on the US. 2016 should see a major economic upheaval as the result of the combination of sovereign debt, interest rates, sluggish recovery, commodity price uncertainties, geo-political unrest, etc.; the list is long and the worldwide economy is fragile.
Concluding thoughts
In 2013 I wrote: “There are unlimited ways to buffer and alter the risk exposure that an organization has, but all involve decision making and an understanding of the consequences of the decision to act on a risk issue. Key decision makers must maintain risk within acceptable limits. However, all decision making is flawed. This is the result of bias, universally poor information acquisition, processing, management and application. We are trapped in a complexity that we have created by virtue of the explosion of connectivity, speed, sources not properly vetted, information overload, lack of information and ‘flow’. Flow relates to perception, intangibles and bias.”
2015 yearend status: we are still plagued by the same issues, biases and lack of learning from the past. The good news? We managed to muddle through. However, the prospects for 2016 appear to be daunting.
Wishing you all a stable, prosperous and exciting 2016.
The author
Geary Sikich is a seasoned risk management professional who advises private and public sector executives to develop risk buffering strategies to protect their asset base. With a M.Ed. in Counseling and Guidance, Geary's focus is human capital: what people think, who they are, what they need and how they communicate. With over 28 years in management consulting as a trusted advisor, crisis manager, senior executive and educator, Geary brings unprecedented value to clients worldwide.
Geary is well-versed in contingency planning, risk management, human resource development, ‘war gaming,’ as well as competitive intelligence, issues analysis, global strategy and identification of transparent vulnerabilities. As a thought leader, Geary leverages his skills in client attraction and the tools of LinkedIn, social media and publishing to help executives in decision analysis, strategy development and risk buffering.
Geary has a passion for helping executives, risk managers, and contingency planning professionals leverage their brand and leadership skills by enhancing decision making skills, changing behaviors, communication styles and risk management efforts. A well-known author, his books and articles are readily available on Amazon, Barnes & Noble and the Internet.
E-mail: G.Sikich@att.net or gsikich@logicalmanagement.com
References
Apgar, David, Risk Intelligence – Learning to Manage What We Don’t Know, Harvard Business School Press, 2006.
Cayer, Christopher, COO Reyactive LLC and a member of the Strategic Business and Competitive Intelligence Group: What do you think the most common reason businesses fail? LinkedIn discussion December 2012.
International Energy Administration (IEA), World Energy Consumption statistics.
Orlov, Dimitry, “Reinventing Collapse” New Society Publishers; First Printing edition (June 1, 2008), ISBN-10: 0865716064, ISBN-13: 978-0865716063
Sikich Geary W., "Walking on Shifting Sand", Global Conference on Disaster Management 2012, 2013, 2014, 2015.
Taleb, Nicholas Nassim, Antifragile: Things that gain from disorder, 2012, Random House – ISBN 978-1-4000-6782-4
World Economic Forum Global Risk Report, 2015.
