To illustrate the power of connected risk, imagine an international oil company called xConnect.
This exposes a raw nerve in corporates’ sophisticated global supply chains and/or delivery systems as they are now vulnerable to extreme events and systemic risk. In an increasingly connected world, corporates and their networks need to prepare for more unpredictable “black swan” events which are caused when a local event produces a so-called butterfly effect and unleashes a cascade of further events through the network, impacting numerous corporates along the way.
The key drivers for connected risk are the ways in which political, environmental, supply chain, cyber and credit risks combine to cause financial, operational and reputational loss. These are increasingly digital and allow a single negative event to exponentially spread disruption and paralysis, and wreak severe economic damage both within and between organisations. It is caused by an inherent weakness in the inter-connected architecture of today’s business-to-business relationships.
This time it is not the barbarians at the gate, but a new business risk, what we call connected risk.Ĭonnected risk is the systemic exposure of commercial organisations, their partners, suppliers and clients to cumulative and cascading financial, operational and reputational vulnerabilities. A world connected by hazards or risk drivers such as political volatility, cyber hacking or supply chain exposures caused by terrorism, piracy, inadequate safety controls and other critical factors which can create a rapid path to ruin. In this new era, organisations are vulnerable to the whims and rhythms of the connected world. Yet, as history has proven, no empire is everlasting, especially as it overreaches itself, resulting in decay and ruin. The likes of Exxon-Mobil, Walmart and Apple straddle the planet in a manner befitting colonial European empires with the sun never setting on the ring of the cash register or the spinning cogs of the production line. We have never had it so good.Ĭompanies with operations spread out across the world can situate their production or headquarters in areas of low tax or low labour costs. With a simple tap of the keyboard, multi-million-dollar deals are struck across continents and consumers can order almost anything from almost anywhere in the world to their doorstep.