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By rethinking risk we can discover new opportunities for growth

24 May 2021

By Mohammad Khan, Partner and General Insurance Leader

COVID-19 wasn’t a black swan event – since 2000 there have been repeated warnings that a global pandemic was a real possibility and many organisations and governments had it on their risk register. Yet when it finally happened, most of us were ill-equipped to deal with it and certainly did not have operational plans to cope with it.

As the UK begins to take cautious steps back to normality, how can we rethink risk to ensure society and organisations are better prepared for future disruption? I believe we need to build a more holistic view of the changing risk landscape – from cyber threats as our world becomes more hyper-connected through to the impact of climate change – and generate greater insight into the challenges ahead for the UK so organisations can make confident decisions that uncover opportunities for growth.

The first step is to understand how the risk landscape has changed during the pandemic. And beyond the risks themselves, where do people’s concerns lie?

The public’s view of risk

Earlier this year, we commissioned research into the UK public’s view of risk. What is clear is that the pandemic has made people more risk averse. The top three concerns of the UK public are pandemics and other health crises (84%), rising unemployment (82%) and cyber crime (82%). This was closely followed by climate change (81%) and daily living costs (80%).

Some of these were mirrored by the concerns of UK business leaders. Pandemics and other health crises (94%), cyber threats (91%), and uncertain economic growth (86%) were cited as the biggest threats to growth in our 24th Annual CEO Survey.

However, while climate change and cyber crime are among the UK public’s top concerns overall, people expect economic factors to have the biggest impact on their lives in the short-term.

We asked how a range of factors would impact daily life over the next 2-3 years, including terrorism, political uncertainty and declining trust in national institutions. Economic issues make up four of the top five risks expected to have a ‘high’ or ‘very high’ impact, including day-to-day living costs (39%), potential recession (36%), increasing taxes (35%) and low economic growth (31%).

Top 3 concerns for UK public: 84% think it's pandemic and other health crises; 82% think it's rising unemployment; 82% think it's cyber crime. Source: PwC Polling of 2000 UK adults, between 16 and 19 March 2021

The changing nature of work

While the public’s pessimism about the economy could be seen as a risk, this is an ideal opportunity for organisations to demonstrate their commitment to the future of the UK economy. After all, it is UK businesses and organisations that will fuel any recovery, as well as provide job security and new job creation. This can be achieved through training and evolving the workforce for the new digital economy, and taking advantage of the opportunities that arise for older, more traditional businesses to pivot to the new hyper-connected world we all live in.  

Upskilling employees will enable organisations to make better use of their technology and transformation investments, making them more agile and resilient to future disruption.

However, the efficiencies delivered by technology also create risks from the public’s perspective, with young people surprisingly being the most concerned - in our survey, 67% of respondents aged 18-34 said they are concerned about the automation of jobs.

Lockdowns imposed by COVID-19 have seen organisations accelerate their transformation and digitisation strategies. This creates opportunities for new jobs in different sectors of the economy. UK businesses and organisations have a key role in helping to create job opportunities, and in many cases reskilling their existing and future workforce for these new jobs. This will likely get a positive reaction from the public – our research into the UK's views on employability and upskilling found that 62% of people are ready to learn new skills to remain employable in the future.

However, the efficiencies delivered by technology also create risks from the public’s perspective, with young people surprisingly being the most concerned - in our survey, 67% of respondents aged 18-34 said they are concerned about the automation of jobs.

Tackling climate change

Climate change is another issue that encapsulates the need to rethink risk. Given the disruption we are already seeing as a result of global warming, it’s interesting that it doesn’t feature among UK CEOs’ top five concerns, particularly as it’s higher on the agenda for the UK public. However, 70% of CEOs were concerned about it this year compared to 44% two years ago and I suspect that will change by next year’s CEO Survey.

It can be overwhelming for individual organisations to consider the wide ranging effects of climate change. People and businesses often just think of the immediate threat to those impacted by extreme weather events. However, it can significantly impact everything from supply chains, compliance with increasing regulation, to the reputation of organisations. More long-term, it increases geopolitical risk due to competition for natural resources, like fresh water.

But even when considering society’s biggest challenges, it is important we maintain a positive outlook. We still have an opportunity to take action to prevent the worst effects of climate change.

An increasing number of organisations and governments have committed to Net Zero, while customers and investors are driving businesses to become more transparent in their reporting around ESG and sustainability. However, our survey shows the UK public are demanding further action – to truly drive change, we need a collaborative effort to create a global standard for climate change impact reporting, so consumers and investors can get an accurate view across an organisation’s activities, including its supply chain.

But even when considering society’s biggest challenges, it is important we maintain a positive outlook. We still have an opportunity to take action to prevent the worst effects of climate change.

How do we address these risks

The UK public thinks the government is best placed to deal with the risks facing society. While 59% of respondents in our survey said the government can 'definitely' or 'probably' help mitigate these risks, this falls to 37% for individuals and just 24% for businesses. 

Does this indicate a lack of trust in businesses to play their part? To play devil’s advocate, it could be taken as a weak signal that the public’s disapproval with some business sectors has reached a tipping point – and there’s a risk that people undervalue the contribution businesses make to managing future risk, when this is a vital foundation to our response to crises.

UK businesses and organisations have a unique opportunity post-pandemic and post-Brexit to prove their worth in helping the UK rebuild, stay competitive and, if successful, thrive on the global stage.

This comes back to developing a deeper understanding of the potential risks and disruptions we face, so we can uncover opportunities for positive change.

UK businesses and organisations have a unique opportunity post-pandemic and post-Brexit to prove their worth in helping the UK rebuild, stay competitive and, if successful, thrive on the global stage.

A collaborative approach to risk

Ultimately, the biggest risks facing society require coordinated, collaborative solutions. For example, during the pandemic we’ve seen private and public sectors work together to create the business loans scheme and roll out the vaccine programme. In more positive times, the London 2012 Olympics was another great example where the collective efforts of business, government and the public created a successful global event. 

In recognition of this shared responsibility to address society’s biggest challenges, we’re working to create a collaborative agenda for action. We’ve brought together prominent leaders from business and the public sector to begin thinking about how organisations can rethink risk and find opportunities for sustainable growth by considering risks in the round and approaching decision making in a different way.

I’m excited about what we’ll be able to achieve together and I’m looking forward to sharing more of our thinking soon.

Contact us

Mohammad Khan

Mohammad Khan

Partner - Head of General Insurance, PwC United Kingdom

Tel: +44 (0)7739 874033

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