McKinsey on Risk

Thomas Poppensieker | Chair, Global Risk Editorial Board McKinsey & Company

“Our ninth issue of McKinsey on Risk arrives amid the greatest global crisis since the Second World War. McKinsey and the Risk Practice have been in constant conversation with healthcare, public-sector, and business leaders to help assess and meet the diverse challenges raised by the COVID-19 pandemic. As we go to press, confirmed cases are counted in the millions, deaths in the hundreds of thousands. Countries and regions struggle with the asymmetrical damage and continue to ramp up testing and treatment as the race to develop and distribute an effective vaccine takes its marathon course.

The spread of the virus led ultimately to near-universal disruption of the global economy as country after country applied preventative restrictions on movement. Then, where the infection rate appeared to fall below the danger level, restrictions were incrementally lifted. As the world’s leading companies resume full operations, they need to tackle the immediate challenges raised by the crisis and address the principal risk areas affecting performance.

McKinsey on Risk is our premier publication presenting McKinsey’s global perspective and strategic thinking on risk. In this issue, two articles describe enduring lessons that emerged directly from the struggle against the pandemic. One discusses the “minimum viable nerve center,” a leadership approach to steering effectively through a fast-moving situation impervious to familiar remedial actions. The second, showing how supply chains can recover after the crisis, explains that actions companies take to mitigate the immediate damage can also build resilience against future shocks.

Two pieces present timely considerations for financial institutions. One discussion, recognizing that banks must operate in a low-interest environment for the foreseeable future, reveals how they can reduce the pain of eroding margins through better governance and data collection. A further discussion explores the regulatory and commercial demands on banks to manage climate risk—one of the steepest challenges our societies will ever face. The authors dissect the specialized skills that banks will need to finance the green agenda while protecting the balance sheet.

The theme of nonfinancial risk is a recurring one for financial institutions. We present two important considerations here. One describes the pathway to the future state of operational-risk management—a future defined by the risk function’s close partnership with the business. A second discusses a new, highly productive and efficient way to prevent financial crime. This novel approach, which shifts the focus from regulatory compliance toward the interception of proscribed transactions, is led by a collaborative investigative team.

Further articles discuss important topics in the management of cyberrisk. One reveals how the regulatory requirements for data protection can become a source of business advantage for companies willing to offer customers greater privacy. In a final consideration, our authors explore a superior risk-based approach to cybersecurity and how it must be supported by enhanced cyberrisk reporting.

In facing both immediate and enduring risk-management challenges, our experts take a global view across business sectors and functions. The industry insights they offer reflect the hands-on experience of companies’ steering through the current crisis and transforming risk management for the future. Let us know what you think, at and on the McKinsey Insights app.”

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Copyright © 2020 McKinsey & Company. All rights reserved.

PRIMO leaves Facebook platform

Press release PRIMO

Today we have decided as PRIMO board to LEAVE the platform of Facebook. We think that the corporate policy of the company Facebook is not in line with our values of good governance, privacy and above all respect and trust.

Following the discussion in the international media, the actual privacy breaches of the platform. the leadership and acting of the management of Facebook we are convinced that it is time to leave this platform.

We are sorry for our followers. We will continu on Linkedin and Twitter. The coming days we will switch off our account. Signed by the board of PRIMO Europe on the 9th of July 2020.

SONAR 2020

SONAR 2020: New emerging risk insights

The SONAR report of Swiss Re Institute informs and inspires conversations about emerging risks, so the re/insurance industry can continue to build resilience also in turbulent times.

The COVID-19 pandemic has accelerated new emerging risks and trends, but the current crisis shouldn’t overshadow the need for the world to transition to a more sustainable economy and a low carbon future.

The pandemic will continue to shift politics, regulation and the market, and bring about a refocus in priorities as countries move toward planning their economic recoveries. Hard hit are Millennials, who face a slump in incomes and unemployment in the wake of the coronavirus disaster. This will put more pressure on intergenerational social contracts.

Other top risks in our SONAR 2020 report include increased use of edge computing, which supercharges data exchange, vaping and e-cigarette addiction, disruptions to supply chains, and declining mental health among teenagers and young adults. Read more

ISO and climate change

PRIMO Europe is focused on helping organisations – as the highest form of public risk management – to implement frameworks, methods and techniques to improve on the Sustainable Development Goals. Goal 13 is Climate Action: Take urgent action to combat climate change and its impacts.

The goals has 5 targets:

  • Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries.
  • Integrate climate change measures into national policies, strategies and planning.
  • Improve education, awareness-raising and human and institutional capacity on climate change mitigation, adaptation, impact reduction and early warning.
  • Implement the commitment undertaken by developed-country parties to the United Nations Framework Convention on Climate Change to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible.
  • Promote mechanisms for raising capacity for effective climate change-related planning and management in least developed countries and small island developing States, including focusing on women, youth and local and marginalized communities.

ISO 14000 family

We think that the package of ISO standards developed for tackling climate change, or at least take action on the shortest term possible, can be very helpful.

The ISO 14000 family of standards for environmental management developed by ISO technical committee ISO/TC 207, Environmental management, is firmly established as the global benchmark for promoting good practice in environmental management and design. The ISO 14000 family also includes supporting tools for environmental management and the design of environmentally friendly products and services.

  • ISO14001 Environmental management systems – Requirements with guidance for use. This standard helps organizations achieve their objectives in an environmentally sustainable manner.

Other standards in the family include :

  • ISO14004, Environmental management systems – General guidelines on implementation
  • ISO14006, Environmental management systems – Guidelines for incorporating ecodesign
  • ISO14040, Environmental management – Life cycle assessment – Principles and framework
  • ISO14044, Environmental management – Life cycle assessment – Requirements and guidelines

For more information download ISO Climate Change.

A global catastrophe

Bruno Latour: ‘This is a global catastrophe that has come from within’

Jonathan Watts

The influential French thinker explains the politics of the Gaia principle, the problems of post-truth and how coronavirus gives us a model for spreading ideas.

Some say this is the revenge of nature. That is silly. Anyone who has studied the history of medicine knows how a virus can make a society feel completely different. We are on a great learning curve. It’s a huge experiment. Read more

The great balancing act

The great balancing act: Managing the coming $30 trillion deficit while restoring economic growth

Rima Assi, David Fine and Kevin Sneader

As they continue to grapple with a global pandemic, governments will need to manage deficits and debt-payment plans while finding the best ways to support economic recovery.

The dual imperative of our time is to save lives and safeguard livelihoods—and governments around the world are pulling out all the stops to do so. The resulting ramp-up of relief and stimulus spending to unprecedented levels has occurred just as tax revenues have slumped. As a result, government deficits worldwide could reach $9 trillion to $11 trillion in 2020, and a cumulative total of as much as $30 trillion by 2023. Read more

Understanding the Black Swan

Times of Malta in conjunction with Seed is serializing the economic report Agile. Perspectives on Malta’s economy post COVID-19. The report was authored by JP Fabri, Glenn Fenech, partner and senior consultant at Seed, and University academics Professor Vincent Cassar, Dr Stephanie Fabri and Dr Jonathan Spiteri. The full report can be read here.

A modern globalised economy is a complex web of interconnected parties: employees, firms, suppliers, consumers, banks and financial intermediaries. Everyone is someone else’s employee, customer and lender. It is also a web that is nested within an external environment and any changes in this environment will have an impact on the rest of the system. This is what is defined as an economic shock.

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The financial impact of COVID-19

The financial impact of COVID-19 on health systems and how CFOs are responding

Bede Broome

In McKinsey’s Health System Financial Resilience Survey, CFOs and finance executives of health systems indicated that they are expecting a dramatic impact on both operating margin and cash flow. Beyond the devastating humanitarian impact inflicted by the COVID-19 pandemic, the economic impact on healthcare systems is, and is expected to continue to be, significant. CFO’s and finance executives of health systems indicated that they are expecting a dramatic impact on both operating margin and cash flow. Read more

Banks for a green agenda

Banking imperatives for managing climate risk

More than regulatory pressure is driving banks to manage climate risk. Financing a green agenda is also a commercial imperative—but specialized skills are needed to protect balance sheets. The surface temperature of the Earth has risen at a record pace in recent decades, creating risks to life, ecosystems, and economies. Climate science tells us that further warming is unavoidable over the next decade, and probably after that as well. In this uncertain environment, banks must act on two fronts: they need both to manage their own financial exposures and to help finance a green agenda, which will be critical to mitigate the impact of global warming. An imperative in both cases is excellent climate-risk management. Read more

A fragile global system

The Pandemic Isn’t a Black Swan but a Portent of a More Fragile Global System

Bernard Avishai

Nassim Nicholas Taleb is “irritated,” he told Bloomberg Television on March 31st, whenever the coronavirus pandemic is referred to as a “black swan,” the term he coined for an unpredictable, rare, catastrophic event, in his best-selling 2007 book of that title. “The Black Swan” was meant to explain why, in a networked world, we need to change business practices and social norms—not, as he recently told me, to provide “a cliché for any bad thing that surprises us”. Read more

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