Imperatives for companies to mitigate ESG risks and thrive in an uncertain world

The contemporary environment illustrates the impact of multiple low-frequency and high-impact risks that arise almost simultaneously: a global pandemic, a geopolitical conflict, financial crises, a series of “one hundred years” climate events, social disturbances, and a significant shortage of labor.

The best way for companies to prepare for such interconnected risks, as well as for others, such as terrorism or cyber threats, is to consider them comprehensively, which achieves better results than managing them independently. Using data, analysis, and statistical models to consider connected vulnerabilities allows business leaders to anticipate events, determine how to address them, and reduce possible downward performance spirals.

For example, investment risk has become more systemic, challenging to diversify or cover, and highly uncertain. Business leaders can no longer rely on the fundamental analysis of historical return patterns to make effective decisions and create long-term value. They need to understand how the new risks of ecology, technology, and demographic changes can trigger weight changes and allow them to anticipate threats, prepare for the unexpected and act decisively.

Analyses are vital to manage and mitigate risks

Data and analysis are critical facilitators as organizations seek to manage risks effectively and increase the resilience of employees and companies.

Develop organizational resilience

Organizational resilience is the ability to recover from adverse events, learn lessons and emerge better positioned in the face of similar events. Resilience building is best addressed on three fronts:

Financial: Developing greater flexibility in the way capital is allocated improves diversity and sources of return under uncertain conditions and helps support agility in the face of the unforeseen. Experimenting and learning quickly from risk mitigation and investment opportunities helps companies better adapt to unpredictable events and achieve more sustainable returns.

Operational: the development of new ways to serve customers and protect employees during unforeseen events requires emergency response planning, crisis management, workforce flexibility and technologies that ensure that the business can continue in adverse circumstances.

Human: companies with leaders who care about the individual physical, emotional, financial and social well-being needs of employees and create a sense of common purpose throughout the company thrive in difficult conditions.

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