CEO's Strategic Insights: Ready for Risk

The best time to learn one of your key suppliers is located in a flood zone is long before the waters rise. The same goes for every risk, in particular in a world of intensifying natural catastrophes and geopolitical turbulence. Corporates seeking planning security for their operations need data-driven digital tools that produce clear, structured insights to stay ahead of evolving, interconnected threats.

In recent months, we've seen moving accounts of companies whose operations were disrupted or even halted by fierce weather or the fallout from geopolitical turmoil. In some instances, just one missing component from an impacted supplier was enough to bring everything to a standstill.

It's clear that the lower costs and economic growth made possible by globalised supply chains have also come with some potentially neglected tradeoffs: deep dependence on often a single partner to deliver a key part on time. Vulnerabilities are just an atmospheric river (or a pandemic) away.

What's more, risks are growing more complex and interconnected.

With climate change, weather-driven hazards like storms and floods are intensifying. Conflicts over resources like water are already here in some places, and on the horizon elsewhere. Civil unrest events have surged, and with them business interruption. Geopolitical volatility also has risk managers weighing scenarios that just a few years ago may have seemed far-fetched.    

The business unit I lead at Swiss Re, Corporate Solutions, has strong relationships with companies in many different sectors that are seeking to better understand all these risks, so they can mitigate them. From agriculture cooperatives and real-estate companies to the world's biggest manufacturers and international brands, our clients' activities span borders and continents. 

They have employees, operations and factories in hundreds or even thousands of locations, as well as sprawling networks of suppliers essential to keeping their commercial activities running. They must stay abreast of a nearly infinite set of perils, any one of which under the right circumstances could threaten a company's livelihood -- or even more importantly, the lives of its workers.

Recently, I spent a couple of days with clients at Swiss Re's Centre for Global Dialogue near our headquarters in Zurich for what we called our Resilience Summit, to share experiences and discuss better approaches to managing risks. Not coincidently, their goals were aligned: keeping workers safe and protecting valuable assets while still pursuing growth opportunities despite brisk headwinds.

One powerful theme that ran through our conversations at our summit, hosted with Swiss Re's software partner Palantir,  was the importance of making the most of the deluge of risk data being produced to make better decisions. Until relatively recently, much of this data was stranded. We knew it was potentially valuable, but we often didn't have the resources to tap the insights it contained.

Software advances are now opening up fresh opportunities to harness data in useful ways.

Swiss Re Corporate Solutions clients are now using our Risk Data & Services (RDS) platform to build digital twins of their operations, and then overlay them with insights about the totality of risk exposures across their organisation and the external partners they depends on. In this way, digital twins can bring staff together to tackle common challenges that suddenly become visible, meaningful, and based on a secure, single source of understanding within the company.

Working collaboratively and outside of silos, employees can respond swiftly to address looming threats or potential bottlenecks that left unattended could cause unacceptable business interruptions. After all, the time to learn about that one component that will grind your operations to a halt if it doesn't arrive on time is long before the floodwaters arrive.

It's not only manufacturers who need these risk insights. Real-estate companies with multi-billion-dollar projects are using information from RDS's suite of risk visualization tools to inform their key investment decisions. One client told our Resilience Summit attendees, "If it's not in the investment committee pack, it doesn't get reviewed."

Similarly, financial institutions can identify risks lurking in their asset portfolios. Energy companies assessing sites for renewable installations can better determine whether projects will be viable in 10, 20 or even 30 years.

Such tools are also a useful resource to understand climate-related risks, supporting companies' emerging  disclosure obligations. Executives are empowered to answer big questions: Will a given geography become too hot for my employees' health in coming decades? Will I be competing for scarce water resources, or be underwater?

In some instances, a company may decide the risks that surface are too great to proceed. They may choose an alternate location or a supplier better suited for a sustainable growth strategy. They may be able to transform the risk into an opportunity -- or terminate it as an intolerable threat.

The important thing is, they'll know what they're getting into. Equipped with data insights, they will understand what their present and future risks look like so they can undertake adaptive measures. They can then move forward with confidence that their businesses will be more resilient for the long haul, even if the ride still promises to be a little bumpy.