With businesses facing a unique convergence of threats in 2024, Axa deputy chief executive officer Frédéric de Courtois looks at how to prepare
More than ever before, companies are confronted with an evolving array of risks that challenge every facet of their businesses. Digital transformation, global warming and geopolitical fractures are combining to create a permanent process of change in our economies and societies. As a result, the concept of risk has taken on a new dimension for companies all around the world.
1. Climate change: a multi-faceted dilemma
Climate change is reshaping the risk landscape for businesses worldwide. Rising temperatures, melting ice caps, and more frequent extreme weather events underscore the urgent need for adaptation measures and collective action. Insurers have witnessed a surge in claims stemming from weather-related disasters, such as agricultural losses due to droughts, to infrastructure damage from hurricanes. The economic toll is significant.
In addition to tangible risks presented by climate change, executives are attempting – and often failing – to navigate the rising ESG backlash and its probable impact on organisations’ freedom to deliver on their ESG strategy. Many companies have transitioned from ‘greenwashing’ to ‘greenblushing’, downplaying their ESG activities in the hope of minimising the backlash seen over the last year in some US states. Under pressure from both sides, companies are finding it increasingly difficult to decide whether greenwashing or greenblushing best serves their interests – although it’s safe to say neither benefits the world in which we live.
Arguably, the most effective response by companies requires concerted collaborative efforts with public actors and policymakers to increase transparency and develop rigorous cross-cutting standards. This can be done by continuing to build a framework that can guarantee access to reliable, comparable and granular data, and pressing for coherence among different standards and pieces of legislation.
2. Technological advances: the next global crisis?
The rapid pace of technological advances presents a double-edged sword for companies. On the one hand, it fosters innovation. The use of AI technologies, for example, can help insurers make more accurate predictions about risks, enabling better pricing and a more streamlined and efficient claims process. On the other, it generates new, unfamiliar risks that companies have never had to contemplate before. In the same vein, AI’s data-reliant nature makes it vulnerable to breaches, which has the potential to put customer safeguarding at risk and lead to regulatory fines and reputational issues for companies.
As our societies become increasingly reliant on digital infrastructure, vulnerabilities to cyberattacks also escalate. As highlighted in AXA’s Future Risks Report 2023, almost 90 per cent of experts believe the risk of a massive cyberattack is significant at a global level, and strong majorities of both experts (73 per cent) and the general population (68 per cent) say they feel vulnerable to this risk in their daily lives.
Businesses worldwide are grappling with the evolving risks posed by digital transformation. A balancing act must be struck so that corporates can harness the opportunities while mitigating the risks. Addressing the looming technological crisis will require global cooperation, and for the public and private sectors to work in partnership to strengthen security measures and foster responsible technological development, given experts identify a major difference in their level of preparedness: only 26 per cent of experts think public authorities are well prepared for the emergence of cyber risks, compared with 45 per cent for the private sector. The path forward involves careful planning, robust risk management and a commitment to responsible technology adoption.
3. Geopolitical instability: a fragmented world
Geopolitical instability remains a major global threat. As we have seen in the past year, the interplay of political dynamics among nations can disrupt supply chains, trigger economic sanctions and lead to regulatory changes, exposing companies to unforeseen risks. The unpredictable nature of geopolitical events amplifies uncertainty for businesses operating across borders, requiring them to navigate a landscape fraught with regulatory and trading complexities.
Recent advances in AI also pose new geopolitical risks. Dissemination of misinformation on social media can fuel fear; cybercrime can exploit vulnerabilities and erode trust; and targeted advertising can create echo chambers that reinforce existing biases.
As tensions persist, companies must proactively assess their exposure to geopolitical risks, strategise to diversify supply chains and adapt to changing regulatory landscapes. Increased risk governance through transparent and accountable management systems will be essential to foster a more resilient global society.
The evolving risk landscape demands a paradigm shift in how companies perceive and manage risk. The emergence – and, ultimately, convergence – of risks underscores the need for more holistic, global and preventative risk management solutions. Embracing a forward-looking approach and focusing on prevention will help businesses build resilience in the face of such complex challenges.
Collaboration is key: in an ever-changing world, partnerships between public and private sectors are imperative to developing robust risk mitigation frameworks that can effectively enhance the resilience and agility of businesses.
Frédéric de Courtois is group deputy chief executive Officer at Axa
