Rethinking Resilience: The Outlook for 2021
At a societal and individual level, we continue to deal with the fallout of the COVID-19 pandemic while striving to make progress on recovery efforts. The world is contending with a fractured future, where the disparities laid bare by the pandemic and the acceleration of risks such as cyber and climate must be carefully and creatively managed to produce a more sustainable and resilient future for everyone.
Industry at a Crossroads
A disorderly industrial shakeout is currently underway, with businesses under increasing pressure from inward-looking national agendas, greater tech concentration and dependency, and heightened public scrutiny.
In their immediate response to the pandemic, governments injected substantial stimulus into their economies. The Saudi Government announced a set of support packages targeting the private sector, totaling almost $61 billion, which included a $13.3 billion package to support the banking and SME sectors.
Smaller businesses are also facing increasing pressure from major competitors that have been able to leverage their resources to solidify their market position and expand. In the technology sector alone, the largest players made dozens of acquisitions throughout 2020. As governments look to enhance market competitiveness through more interventionist means, businesses may be exposed to more scrutiny or experience ripple effects due to their greater dependence on major technology service providers impacted by tightening regulations.
Pressures from investors, consumers and employees alike are mounting around key societal issues, from labor and consumer protections to company ethics, inequalities and climate change. By meeting the societal imperative of taking firmer and more active stances on key issues, during this critical recovery period and well into the future, businesses can avoid diminishing their revenue, reputation and access to capital and talent.
Technological Transformations Driving Increasing Cyber Exposures
The pandemic precipitated an unheralded technology revolution for big and small businesses alike. Rapid digitization transformed social and work interactions overnight. E-commerce, virtual conferencing, gaming and streaming all underwent unprecedented growth. By some estimates, internet use in 2020 increased by 30% worldwide.
This rapid digitization also exponentially increased companies’ cyber exposures and created more complex and potentially less secure networks. This year highlighted the failure of cybersecurity measures as a top short-term risk. Moreover, throughout 2020, we have seen increasing cyberattacks on government agencies and companies globally. Comparing the second half of 2019 to the first half of 2020, the volume of cyberattacks doubled, with many leveraging the COVID-19 crisis for an entry point. Saudi Arabia continues to be a popular target for cybercriminals with 75% of surveyed Saudi CIOs stating that placing investments in privacy and cybersecurity is their topmost business objective, particularly as part of their digital transformation agendas. The average data breach in Saudi Arabia now costs companies US$6.52 million, a 9.4 percent increase from 2019, according to a report commissioned by IBM Security.
This monumental shift could create potential catastrophic risks on a longer horizon. The rush toward digitization, in response to the need for efficiency and reduced on-site labor, may further expose businesses to unforeseen security, regulatory, financial and ethical risks, particularly with more socially activist consumers and workforces concerned with further job losses.
Creating a More Resilient and Sustainable Future
In a year when the pandemic and its cascading impacts were a primary focus, environmental risks retained top spots as the most likely and consequential risks over the next decade. This should come as no surprise, with 2020 one of the costliest years on record for natural hazards and with the pandemic complicating responses to extreme weather events. This has forced conversations on how we understand, prepare and manage risks — particularly emerging and complex risks — in a fast-changing environment.
Looking forward, many governments are focusing on a “green recovery,” with green infrastructure and clean energy project investment central to their stimulus packages. For instance, Saudi Arabia launched a new green campaign to reduce desertification in the Kingdom and help develop natural habitats by planting 10 million trees by the end of April 2021. The initiative falls under the Kingdom’s Vision 2030 plan to achieve environmental sustainability by the end of the coming decade.
The funding dedicated to such efforts has dispelled the myth that governments do not have the financial capacity or will to support more rapid decarbonization and energy-efficiency transitions. Lower consumption levels and demand for oil, if they persist, also may provide grounds for further accelerating regulatory action.
Business will benefit from investing in sustainability transitions now, leveraging increasing government-provided incentives, rather than risking forced timetables and a more disorderly and costly transition. By keeping an eye on potentially high-impact events across the risk landscape, and by evolving into more prepared and responsive organizations, businesses should be able to enhance their resilience and successfully navigate the risks and opportunities ahead.