Thread by @philvenables

Risk Mega Trends. A thread.

(post here: bit.ly/2S9QAUV)

I've been thinking more about mega trends applied to risk, specifically operational risk. Planning for these immense & relentless forces that shape the world is critical. This list is likely not complete.

1/13

1. Mass Digitization – "Software Eats the World". All businesses have or are becoming digital businesses, the amount of software and infrastructure is increasing dramatically. Everything is connected and expected to work 24x7.

2/13

So, we feel the impact of events more closely – there are less manual fall backs. Resilient systems have to be good at tolerating component failure - in an Internet-scale environment even meeting 99.999% reliability still means 10,000’s component failures per day.

3/13

2. Extended Enterprise – the API Economy. There are still physical store fronts and customer interactions through web and mobile apps, but ever more businesses will be constructed through components connected by Application Programming Interfaces.

4/13

New products are constructed from vendor components stitched together and re-combined. Not only do organizations have to worry about their own downstream 3rd, 4th or even 5th party relationships they also have to worry about customer’s environments that connect to them.

5/13

3. Concentration Risk – Winners Take All [the risk?]. The consequences of the API economy are more exposure to network effects which can create Pareto distributions of how services are provided. This results in many large markets dominated by key service providers.

6/13

4. Automation and Digital/Physical Convergence – Rise of the Robots. Manual processes will continue to be automated, often in fundamentally good ways but sometimes just glued together with scripts (so called Robotics Process Automation).

7/13

This may reduce the operational risk of manual error but can increase the risk of unintended consequences and make environments have less slack and natural resilience. How many major issues have been detected by people spotting something that just “didn’t look right”?

8/13

Autonomous agents and AI will have benefits but also will carry significant risk as well as represent new attack surfaces. The consequences of all this will be amplified when the automation more regularly changes both the virtual and physical worlds: "digital twins" risk.

9/13

5. Internet and National Fragmentation - "Digital Balkanization". Privacy legislation and regulation is of course crucial, but the ongoing embedding of explicit or implicit data nationalization rules risks fragmenting the Internet and other infrastructure.

10/13

6. Programmable Instruments – Virtual Everything. While the future of crypto-currency is unclear, it seems more likely that programmable money and other instruments based on the use of distributed ledger technology/stable-tokens will stimulate business process redesign.

11/13

7. Hazardous World – "An Age of Rage". We will continue to be challenged by geo-political events and conflict often with cyber consequences, disease, climate risks, misinformation and information warfare operations and much more besides.

12/13

Some will carry more reputation risk than actual direct loss – but given Risk = Hazard + Outrage we will likely have to care just the same.

Bottom line : if your strategy for managing risk depends on any of these not being true then you might want to challenge that.

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