12/19/2014

(Un)predictions for the new year

 This is the time of year when pundits and media make their predictions for the coming year. The most diligent will also look back at how well their predictions last year performed – and recognize the painful truth that foresight is far from 20/20. Who could have predicted at the start of the year:

 

 

You get the picture.

 

I have to admit that it's fascinating – and possibly useful – to read predictions for 2015. And in the back of my mind I wonder what I would do if each of them came to pass. But I also know there are many things that I could never have seen coming. For those, I will need to be vigilant and, yes, resilient.

 

Come to think of it, I think that will be my New Year's resolution.

 

A happy holidays to all.

 

Dennis Chesley

 

Meet Dennis Chesley  |  Visit the PwC Resilience site 

Categories: Dennis Chesley, Environmental Resilience, Geopolitical Resilience, Societal Resilience, Economic Resilience

10/27/2014

Is Treasury the hidden jewel in resilience planning?

As a business leader, when you think about what you can do to build resilience in your organisation, I’m guessing you don’t immediately think “treasury.”

But think again.

Resilience is the ability of an organisation to react to change to survive and evolve. Surely then, being able to call on alternative sources of funding and liquidity will make your finances more flexible to capitalise on unexpected investment opportunity. And isn’t it essential to understand the market forces  or disruptive events that might impact foreign exchange rates or commodity prices if you’re compiling contingency plans to increase agility? And when banks tighten lending policies, wouldn’t innovative financing arrangements that enable your suppliers to access liquidity make your supply chain more reliable?

Adaptability, agility, reliability are just some of the characteristics of a resilient organisation. Your treasury and finance teams – if connected to your strategic planning – can help you build them.

This is becoming more acute as a host of global megatrends are accelerating the pace of change, causing more complex risks and unexpected opportunities. Whether it’s technological breakthroughs or demographic and social change, shifts in economic power or rapid urbanisation, climate change or resource scarcity, these trends will change how you do business in one way or another. As you build your strategies and plans to adapt to change and even capitalise on it, your finance and treasury teams can add value in that challenging environment. For treasury, that means focusing on these key building blocks:

Capital and Liquidity, Financial Risk Management and Treasury Infrastructure. The results?

  • Capital and Liquidity: Secure and diversified funding sources; “Real-time” visibility into cash position globally; Flexibility to fund and invest globally; Comprehensive scenario view in capital and liquidity planning
  • Financial Risk Management: Comprehensive inventory of key risks; Advanced risk analytics including scenario planning; Formalisation of risk appetite and tolerances; Plans to deal with potentially disruptive market events
  • Treasury Infrastructure: Flexible operating model well-aligned with business; External orientation, global perspective and strong analytical skills; Flexible and scalable technology architecture; Strategic approach to selection of external partners; Leading-edge transactions processing products, services and tools

If you want to find out more about how a strategic approach to treasury can enhance strategic resilience, I encourage you to read any of the documents here on our Resilience Journal site. Otherwise, contact me directly.

Read the article | Meet Dennis Chesley | Meet Peter Frank | Visit the PwC Resilience site

10/22/2014

PwC to Update COSO Enterprise Risk Management-Integrated Framework

by Dennis L. Chesley

I’ve said many times before on this blog, one of the building blocks for resilience is the ability to adapt to a faster-changing and more uncertain world. This is true for organizational strategies set, people employed, and the frameworks that guide us. That’s why my colleagues and I at PwC so strongly support the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) announcement yesterday to review and update its Enterprise Risk Management–Integrated Framework.

The years after the financial crisis have caused significant change in the area of risk management. Risk practices have evolved, risk tolerance and risk appetite levels aren’t the same, regulators’ expectations and understanding of how risk management ties into an organization’s strategy, objectives, and governance structure are increasing.

As I said in the Wall Street Journal blog (subscription required) earlier this week, “The ERM goal is to set up a process whereby an organization can say here are the objectives we’ve set out, here are the risks or threats that could impact, how do we begin to manage, monitor and mitigate those risks.”

With this much risk change, complexity and velocity, it’s time to review COSO’s widely-accepted framework that guides how organizations can approach and manage risk. For, like any other business-critical function, risk management needs to reflect shifting realities, to provide leaders with today’s – and tomorrow’s - risk information. This is a pre-requisite to adaptability, resilience and being better-positioned to capture the upside of changing risk landscapes.

Our team at PwC will work with COSO to lead the review and refresh the Framework over the coming 12 to 24 months. I will update you as regularly as I can on what we learn.

If you have strong views or questions about COSO’s Enterprise Risk Management–Integrated Framework, I encourage you to share them with me here on this blog. Visit our Resilience Journal site for more information on COSO.

Meet Dennis Chesley | Visit the PwC Resilience site

08/29/2014

Social listening: Real-time market intelligence

In a digital age, business resilience — managing risk while seizing strategic opportunities — is almost unthinkable without robust data analytic capabilities.

Data analytics, like sport, is about being able to play both offence and defence. On offence, it enables you to understand your customers better — and hopefully to gain competitive advantage by anticipating their needs before anyone else can.

On defence, it can serve as an early warning system — not just against the usual bad cyber-actors, but also against early signs of negative buzz (digital grumblings that can portend trouble for your brand down the line), or the first moves of a potential competitive threat.

In this article, my colleague Anand Rao offers a strategically compelling look at social listening — sophisticated data analytics techniques that resilient companies use to achieve what he calls market sensing. Like all data analytics, social listening is fundamentally about mining unstructured data — in this case, social media and other forms of digital chatter — to generate meaningfulinsights and effective strategies — in this case, identifying and responding to market trends and improving customer loyalty.

In a world connected by a single, real-time nerve net of communication — where the balance of power has shifted to the consumer and where market dynamics can swing at lighting speed — social listening is rapidly supplanting traditional market research techniques such as surveys, focus groups and interviews. Not only because these techniques contain inherent biases — the format cannot match unguarded comments made on social media when it comes to revealing what customers are really thinking — but also because such research is trapped in an instant of (past) time. It’s dated almost as soon as it is captured.

And in a viral consumer market, being dated is a risk few companies can afford.

After all, as Anand points out, your competitors are likely to be listening to the market chatter. The media is certain to be listening. Regulators and even your shareholders may even be listening to social chatter. So you’d better be listening, too.

I encourage you to share your thoughts in the Comments section.

Read the article | Meet Dennis Chesley |  Visit the PwC Resilience site

07/25/2014

ASEAN on the Upswing: Highlights from the WEF Conference on East Asia

by David Jansen

As the world continues to drag itself out of the global financial crisis, all eyes are on Southeast Asia. The region has consistently outpaced the rest of the world in terms of economic expansion in recent years. With positive demographics and improvements in education, wealth will only increase and the resulting consumption boom will drive economic growth higher in the coming decades.

This was the backdrop for the World Economic Forum Conference on East Asia (#wefeastasia), held in Manila earlier this year.

Participants from over 30 countries gathered to discuss some of the pressing issues facing the region ahead of the December 31, 2015 ASEAN (Association of South East Asian Nations) economic integration. Hosting the conference was Philippine President Benigno Aquino, whose country registered 2013 GDP growth of 7% — despite the damages caused by super-Typhoon Yolanda — and is expected to maintain a healthy GDP growth rate of 6.5% in 2014. Other countries in the region almost universally expect to record 2014 country GDP growth above 5%.

The mood at the conference was one of excitement and recognition that although challenges remain, the time has come for ASEAN to play a significant role on the global stage. After all, ASEAN — comprising 10 countries with a combined population of approximately 600 million people — has a combined GDP of about US$2 trillion, with post-2008 growth rates far exceeding those of the US and EU.

President Aquino confidently stated that in the Philippines has gone from "the sick man of Asia" to "the Comeback Kid", earning him applause from the delegates.

One of the most discussed issues was the urgent need for infrastructure within and between nations.

Asian Development Bank (ADB) officials reported that investment in infrastructure has not recovered in the nearly 20 years since the Asian financial crisis. While there has been progress in recent years in several countries, the ADB estimates that over US$1 trillion is required in regional infrastructure investment to maintain ASEAN's growth trajectory, and warned that individual countries will not be able to finance more than 50% of this need. Discussion quickly moved to potential solutions, with public-private-partnerships (PPP) being the most obvious.

However, while many business executives reported the availability of project financing from global commercial lenders, hedge funds and the like, the challenge appears to be with the public sector. Governments at all levels lack the experience to prepare comprehensive PPP investment proposals to shop to investors. Institutions such as the ADB are assisting with capacity-building programmes but it will take time and the involvement of the private sector to make any noticeable difference.

Regional security was also on the minds of the business leaders, academics and NGO officials who braved the 36-degree Celsius temperatures throughout the event. Admiral Samuel Locklear III, head of the U.S. Pacific Fleet, counselled for cool heads to prevail during a time of high tensions in the South China Sea. Rebalancing economic power is closely associated with evolving military and political relationships.

ASEAN is less than 18 months away from achieving an integrated common market through the formation of the ASEAN Economic Community. This integration, together with recently concluded trade agreements, is expected to further boost production and consumption in the region. Participants debated the impact on industries such as logistics and transportation, and how new technologies and innovation would transform the landscape.

With a military coup in Thailand having taken place hours before the conference commenced, discussion also centred on the changing social expectations of the growing middle class, their political empowerment and desire to rebalance income inequality.

The undeniable conclusion was that this integration, with its simplified rules, lowered tariffs and decreased costs for doing business, will catapult ASEAN into the big leagues, creating more employment and raising incomes — the kind of inclusive, equitable growth that is good news for everyone.

Read the article | Meet Dennis Chesley | Meet David Jansen | Visit the PwC Resilience site

07/18/2014

What the Brazil-Germany World Cup match can teach us about resilience

Business lessons from a World Cup match? Really?

Despite the seemingly facile comparison, there actually is a great deal that businesses can learn from the shocking 7-1 defeat of the host-country Brazilian football (soccer, for those of us in the US) squad at the hands of Germany’s team in this month’s FIFA World Cup semi-final match.

In this incisive piece just published on our CEO Insights blog, PwC Brazil’s Advisory Risk Leader Evandro Carreras draws the many lines that connect business resilience to athletic-club resilience. After all, both involve organisations, players, strategies and stakeholders, and feature measurable results. Both also regularly face loss of talent, unforeseen setbacks, sudden turnarounds, as well as unexpected opportunities.

As this particular match illustrated so dramatically, the team that showed more resilience — a clear game plan, agility, innovation, cohesion — advanced to the final, while the losing team was left to lick its wounds and ask questions.

But resilience isn’t just about who wins and who loses. It’s also about bouncing back. Shortly after the defeat, Brazilian President Dilma Rousseff urged her stunned nation to "Get up, shake off the dust and come out on top." I don't know that you could find a better definition of resilience.

I encourage you to read Evandro’s fascinating blog post, and as always, to share your own thoughts and experiences — be it on athletic or business resilience — in the Comments section.

 

Read the blog post | Meet Dennis Chesley | Visit the PwC Resilience site

06/12/2014

Big Data: Big problem or big opportunity?

It's been my experience that complex and fast-changing trends often present opportunities for businesses who embrace strategic resilience.

Case in point: Big Data. While the possibilities and promise of this new world of massive data sets could make an analyst, product development team or marketer giddy, it can also create significant reputational or regulatory problems if such data is mismanaged or abused.

That’s because, fundamentally, businesses run on trust — not data or dollars. And trust, once lost — whether through a cybercrime breach, or the simple perception on the part of your consumers that you have overreached with their private information — can be very hard to win back. Worse, consumer dissatisfaction can lead to stiffer regulations, which of course could hamper innovation and growth.

Many organisations are finding that it’s hard to draw a line when the ground — of technology, data, regulation, competition — is constantly shifting. And therein lies the opportunity.

This article, by my colleague Jacky Wagner, describes the seeming paradox of Big Data, its promises and perils, and argues that, beyond focusing on compliance and risk management, business leaders must view the issue strategically.

As she puts it: “Resilient organisations get ahead of reputational, legal and customer risks by being proactive protectors of their consumers’ privacy. They jump further ahead by finding out what customers want, giving them a choice and an active role in data sharing, and promising something of value to the customer in return.”

After all, if businesses want openness from their consumers, they also have to give it back.

I encourage you to read Jacky’s article, and to share your thoughts in the Comments section.

Read the article | Meet Dennis Chesley | Meet Jacky Wagner | Visit the PwC Resilience site

05/23/2014

The Earth is resilient. But is your organisation?

by Jeff Senne

The Earth is resilient and will be just fine. But here’s what I ask myself: How resilient are we? Will we as a species continue to thrive in the face of some of the threats we face? What about our institutions — are they built to last?

A new National Climate Assessment written by a team of 300 experts, and issued by the White House on May 7, 2014, stresses in stark terms that we are testing the boundaries of our ecosystem’s resilience. For example, according to the report, sea levels have risen eight inches since 1870 — and we can expect further rises of anywhere from another foot to six feet by the end of this century.

While the geophysical consequences of these and other climate-change effects are potentially catastrophic, I prefer to see climate change as a people issue rather than as an Earth issue. Because safeguarding our collective home requires human choices.

Of course, climate-change resilience is also very much a corporate issue. Environmentally, socially and economically, businesses have a great deal at stake. No matter which aspect you care about most, climate change will likely affect it. The impacts threaten to increase costs of raw materials, cause business disruptions, erode markets for your products, impede overall economic growth and deepen the challenges faced by your staff and customers.

An entire gamut of stakeholders — from investors, regulators and the public, to the Millennial-generation talent we will all need to thrive — are focusing on companies’ carbon emissions, sustainability reporting, and corporate responsibility programmes. They want to know what companies are doing to prepare for potential climate disruption as well as for operating in a carbon-constrained world. And emerging reporting approaches, such as those advanced by the new Sustainability Accounting Standards Board(SASB), are gaining traction among forward-thinking organisations and mainstream investors alike.  

Here at PwC, among many other sustainability measures, we’ve launched several highly visible projects with the United Nations International Strategy for Disaster Reduction (UNISDR) — the latest of which, Tangible Earth, the world’s first interactive digital globe that dynamically represents the real-time action of weather, climate variations, pollutants and other agents on the Earth — will be hosted in our New York offices as a physical reminder of the many environmental forces acting on our planet.

So what is the most resilient and responsible way of handling the looming threats associated with climate change — as well as the four other global megatrends PwC has identified which will profoundly mark our future?

The first step, and one that needs to be repeated at every stage, is to activate your greatest resource — your people. Ask them what they think, where do they see both the risks and opportunities? With their help, you can also engage your other stakeholders — your suppliers, clients and others — in a conversation on climate change and the other megatrends. What do they see coming, what might you be missing — are we all prepared?

The goal of these internal and external dialogues is to help your managers distil the “facts on the ground" from those best placed to address them — and to grasp some of the solutions that bubble up from these conversations.

From introducing process innovations and new products and services that drive social, environmental and economic benefit, to lowering carbon footprints and conserving energy, to enhancing their brand by embracing a responsibility and resilience agenda, businesses have a central role to play in addressing this challenge. And forward-thinking organisations are finding competitive advantage in moving forward vigorously in this direction.

The key is to start with engagement, asking: What is my responsibility, what is our opportunity as an organisation? That is the path to resilience.  

Meet Jeff Senne | Visit the PwC Resilience site

05/09/2014

Growth versus ‘good growth’: A world of difference

Is growth always a good thing?

This seemingly obvious question actually invites us to a deeper, more nuanced consideration of what, in a world of growing large-scale risks, constitutes true prosperity — and perhaps to refocus our strategies on more resilient outcomes.

In this article, PwC UK directors Mark Ambler, Tom Beagent, Andrew Thurley argue that a narrow focus on growth for growth’s sake can have the effect of steering resources towards shorter-term economic gains — gains which can be perishable and often are not shared. Thus, they suggest, some forms of growth can actually exact a higher cost in resources than any short-term return they might generate.

By contrast, ‘good growth’ — which factors in social and environmental issues and focuses on creating longer-term, sustainable benefits for more stakeholders — can be both more tangible and more lasting.

This is an issue we’ve looked at before here at Resilience. But in this article we take a fresh look at the question through the lens of the recently released World Economic Forum’s (WEF’s) Global Risks 2014 report — and its call for longer-term thinking on building systemic resilience and prosperity.

According to the WEF report, three of the top six highest-impact risks facing our globe in 2014 — water crises, climate change, and extreme weather events — are environmental in nature. Under such ominous conditions, the authors ask us to focus on how we can achieve ‘good growth’.

Addressing both economic and environmental stakeholders, while ensuring long-term resilience, requires a mental leap to a new way of describing growth. This in turn requires a new way of measuring the potential total impact of an organisation’s decisions, and a new, more collaborative approach that takes into account the larger benefits at stake — and acts accordingly.

While this is a challenging task, it is an essential one. Businesses, after all, perform better in a society that is stable, healthy and prosperous. Mark, Tom and Andrew make a clear case for rethinking our definition of growth with an eye toward building exactly this kind of systemic resilience — and sustainable prosperity for all.  

As always, I encourage you to share your thoughts in the Comments section.

Read the article | Meet Dennis Chesley | Meet Mark Ambler | Meet Tom Beagent | Meet Andrew Thurley | Visit the PwC Resilience site

03/26/2014

Shouting “Fire!” in a Crowded Web

Consider an astounding fact. Within three years, the number of devices connected to IP networks will be nearly three times as high as the global population, according to CISCO.

In a hyperconnected world, where news can be captured and communicated as quickly as it is created, that can spell trouble. It’s easy to see how a digital wildfire — the viral spread of information, misinformation or disinformation via the Internet and social media — can wreak havoc on any organisation, government, or system, in the blink of an eye.

The interwoven technological fabric known as the World Wide Web is a flammable substance, indeed. And while not all incidences of fast-spreading, unfiltered information are necessarily negative — we’ve seen recent examples of the widespread use of technology to spread messages of reform and effect positive social change — digital wildfires, whether accidental or deliberate, are often disruptive.  

They’re also becoming more frequent, and more consequential. Beyond the immediate economic and geopolitical damage, digital wildfires can have a longstanding, corrosive effect on basic trust. The World Economic Forum (WEF), which highlighted the phenomenon in its Global Risks 2013 report, is now calling for new thinking to prevent “digital disintegration” — a large-scale loss of trust in the Internet.

Inasmuch as we define resilience as the ability to adapt to changing conditions, withstand shocks and bounce back to equilibrium, it’s clear that resilient organisations have a vital interest in creating strategies for dealing with these hard-to-control wildfires. This is especially true when you consider that we operate in a technological environment that is far from an orderly, globally regulated system.

Which is why this article, by PwC’s John Regas and Beth Cartier, is so timely. While it may seem almost an impossible challenge to put the genie of disinformation back in the bottle, there are, in fact, several concrete steps organisations, and market actors collectively, can take before, during and after a widespread panic, to prevent, extinguish — or at least, contain — the damage of a digital wildfire.

There is no doubt that technology, by making information instantly accessible across cultures, geographies and jurisdictions, has both increased the good of global connection and amplified the risks of fast-spreading false information and malicious rumours.

John and Beth’s fascinating piece lays down the background, the latest global developments, and the best practices you can follow in building digital firewalls. So that the next time somebody yells “Fire!” in a crowded Web, your organisation doesn’t have to be the one getting trampled.

I encourage you to read this important article, and to share your own thoughts and experiences in the Comments section.

Read the article | Meet Dennis Chesley | Meet John Regas | Meet Elizabeth Cartier  | Visit the PwC Resilience site

);