Global Risk Institute
A Riskier World? It’s HereA Global Risks and Trends Framework
May 10, 2017
Lois TulloExecutive in ResidenceStephen HartPrevious CRO BNS
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Global Risks and Trends Framework (GRAFT)What is it?
• A systematic process and tools to evaluate the synergistic impact of Global Risks and Trends.
• A method that:
•Compares the assumptions supporting your strategic plan with the correlations of prioritized Global Risks and Trends to identify Key Insights for the organization;
•Promotes a shared understanding of the implications of Global Risks and Trends on your organization’s strategic plan; and
•Enables directors to make more informed decisions.
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Organizational Vision & StrategyRisk Appetite Statement
Examples of Key Insights- Increased National Sentiment, State Conflict, and Weapons of Mass Destruction resulting in increasing strain on trade talks, potential disruption to supply chains, and reduced M&A and IPO volumes.- Climate Change, Increasing Extreme Weather Events, and Water Crisis causing roaming black and brown outs, resulting in factory slow and shutdowns.
Global Risks & Trends
Geopolitical
Economic Societal
EnvironmentalTechnologicalKey Strategies & Strategic
Assumptions
Trends
Risks
Urgency
Impact
GRAFT
Overview of Global Risks and Trends Framework
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1.Articulate Key
Strategies
2. Identify Strategic
Assumptions
3. Review & Understand
Global Risks and Trends
4. Rank and
Prioritize Global
Risks and Trends
5. Map Global
Risks and Trends on to GRAFT
6. Identify Correlations, Scenarios and Key Insights
7. Challenge Ranking
8. Compare Key Insights to Strategies
9. Adjust the Organizational
Strategies
How to Apply the Global Risks and Trends Framework
Organizational Vision & StrategyRisk Appetite Statement
Key Strategies &
Strategic Assumptions
Global Risks and TrendsEconomic, Environmental,
Geopolitical, SocietalTechnological
R A N KGlobal Risks & Trends
Geopolitical
Economic Societal
EnvironmentalTechnological
Key Insights
Challenge Rankings
Organizational Strategy
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Step 1 & 2Articulate Key Strategies and Assumptions
Step 1: An effective strategy should already have outlined:
Step 2: What GRAFT adds:
1 What is the vision for the organization, why and where is the organization is going?
What are the underlying Geopolitical, Environmental, Economic, Societal, and Technological assumptions that the organization has made in establishing its vision?
2 How will the vision be accomplished? What is the Strategic Plan of the Organization?
What are the Geopolitical, Environmental, Economic, Societal, and Technological assumptions about your team, systems and processes that need to be in place to accomplish your strategy?
3 Are the underlying skills and tools in place to accomplish the tasks at hand?
What are the Societal and Technological skill based assumptions that have been made?
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Bank of Nova Scotia – 2016 - Total assets: $896.5 billion CAD
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Step 2Identify Strategic Assumptions - Examples
1. Current Demographic trends in the population2. Level of Chronic Disease3. History and prediction of infectious diseases4. Maintain credit rating5. Degree of Peace in the countries which they operate, Terrorism levels6. Degree of Social Stability in the countries which they operate7. History and Predicted extreme weather event losses in the countries which they operate8. Degree of stability of the Government in the countries in which they operate (longevity, privatization, corruption, debt)9. Degree of the effect of Rule of Law in the countries in which they operate10.Degree of Stability of the Regulatory Environment in the countries which they operate11.Degree of Reliable of the infrastructure (Power, telecommunications, water, etc.) in the countries which they operate12.Degree of Stability in the computer systems 13.Degree of Freedom of movement of and security of information in the countries which they operate14.Degree of freedom of movement of individuals in the countries in which they operate15.Degree of Stability and liquidity in FX markets in the countries which they operate16.Stability and liquidity in Equity markets in the countries which they operate17.Stability and liquidity in bond markets in the countries which they operate18.Moderately rising interest rates in the countries which they operate19.Access to skilled workforce in the countries which they operate20.Law abiding workforce in the countries which they operate
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Step 3 Collective Understanding of Global Risks & TrendsGeopoliticalRisks1. Terrorist Attacks2. Interstate Conflict3. Failure of national governance4. Weapons of Mass Destruction5. State Collapse or Crisis6. Failure of Regional or Global
Governance
Fragile State Map 2016
Trends1. Increasing National
Sentiments2. Changing Landscape of
International Governance
Geopolitical Concerns1. Syrian War2. Russia and Crimea3. China and the South Sea4. Brexit5. US uncertainty6. North Korea missile firing in Japan Sea
Political Uncertainty1. Turkey’s vote2. France’s election3. Germany’s election4. China’s election
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Step 3 Collective Understanding of Global Risks & TrendsSocietal
Trends1. Increasing polarization of
societies2. Aging Population3. Rising Urbanization4. Rising Geographic Mobility5. Rising Chronic Diseases
Risks1. Large-scale involuntary
migration2. Water Crisis3. Food Crisis4. Profound Social Instability5. Spread of Infectious
Diseases
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Step 3 Collective Understanding of Global Risks & TrendsEconomicRisks1. Unemployment and
Underemployment2. Fiscal Crisis/Sovereign
Debt3. Asset Bubble4. Failure of Financial
Mechanism or Institution
5. Illicit Trade6. Energy/Commodity
Price Shock7. Deflation and Inflation
Trends1. Rising Income and Wealth
Disparity2. Growing Middle Class in
Emerging Economies
World Unemployment
Percentile Unemployment by Country
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Step 3 Collective Understanding of Global Risks & Trends Technological Risk
1. Cyberattacks2. Data Fraud or Theft3. Failure of Critical Infrastructure/Information
Infrastructure Breakdown4. Adverse Effects of Technical Advances
DDOF Peak size and frequency of Attacks have increased dramatically in 2016
https://pages.arbornetworks.com/rs/082-KNA-087/images/12th_Worldwide_Infrastructure_Security_Report.pdf
Trend1. The Rise of Cyber Dependency
Seven Hours of Screen Use on Average Daily
0 100 200 300 400 500
Daily Screen UseMinutes
Smart Phone TV Laptop Tablet
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Step 3 Collective Understanding of Global Risks & Trends
EnvironmentalTrends1. Climate Change2. Environmental
Degradation
Risks1. Extreme Weather Events2. Natural Disasters3. Failure of Climate-Change
Mitigation and Adaption4. Man-Made Environmental
Disaster5. Biodiversity Loss and
Ecosystem Collapse
Climate Change Effect
Flooding In China
CO2 levels dangerously high
https://www.ipcc.ch/ipccreports/tar/wg1/088.htm
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Step 4 & 5 - Rank, Prioritize & Map Global Risk and Trends
Urgency
Immediate 30 years3 – 5 years
Impact
High
High
Low
Low
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Step 6 – Identify Correlations
GRAFT Correlation Matrix Tool
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Step 6 - Example Correlation, Scenario and Key Insights
Correlation
Geopolitical
EconomicSocietal
EnvironmentalTechnological
Failure of National Governance
Rising Cyber DependencyData Fraud/Theft
Terrorist Attacks
Failure of Critical Information Infrastructure
Cyber Attacks
Fiscal Crisis / Sovereign Debt Inflation / Deflations
Aging Population / Young Population
Increasing National SentimentRising Income & Wealth
Disparity
Increasing Polarization of Society
Climate Change (Regulation)
Extreme Weather Events
Natural Disasters
Unemployment / Underemployment
Failure of Regional or Global Governance
Involuntary Migration
Growing Middle Class in Emerging Economies
Asset Bubble
Illicit Trade
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Step 8 & 9 - Apply Key Insights
Organizational Vision & StrategyRisk Appetite Statement
Examples of Key Insights- Increased National Sentiment, State Conflict, and Weapons of Mass Destruction resulting in increasing strain on trade talks, potential disruption to supply chains, and reduced M&A and IPO volumes.- Climate Change, Increasing Extreme Weather Events, and Water Crisis causing roaming black and brown outs, resulting in factory slow and shutdowns.
Global Risks & Trends
Geopolitical
Economic Societal
EnvironmentalTechnologicalKey Strategies & Strategic
Assumptions
Trends
Risks
Urgency
Impact
GRAFT