Thinking the unthinkable

There are currently a great many challenges to global businesses, including the impact of climate change and social upheaval both of which could result in resource shortages and profound supply chain issues. The latter could be exacerbated by the current ‘just in time’ product delivery system that companies across the globe have adopted to keep inventories low. In addition, there are political risks and threats such as piracy, which although age old, are being redefined and evolving in response to the economic downturn. Expropriation of corporate assets is another threat that is moving up the agenda for multinational companies. Businesses also need to move with care when applying innovative technologies such as nanotechnologies or when planning for the impact of pandemics. Addressing the NATO Strategic Concept Conference in Brussels last week, Lord Levene, the chairman of Lloyd’s, highlighted the need for governments and multinational businesses to ‘think the unthinkable’ in terms of understanding the potential risks and threats to stability of the global economy and security. For NATO, the objective of the conference was to outline NATO’s ‘fundamental security tasks’ in a changing global context to representatives of government, business, civil society, NGOs, academia and other multi-lateral organisations and to provide guidance on the political and military means to be used by the Alliance in achieving these objectives

Insurers are subject to unpredicted risk all the time; who would have thought that terrorists would carry out multiple hijacks and fly the planes into the twin towers and pentagon? Who amongst insurers would have thought that policies written to cover aviation, property damage, business interruption, employers liability, fine art, life insurance and disability insurance could be triggered simultaneously; another previously unbelievable scenario. Except that 9/11 caused such a combination of loss. Who would have believed that the default of a small number of mortgages in the US could lead the world into a global recession? Again it is our understanding of the interconnectedness of processes that is flawed; viewed individually these elements seem relatively well behaved; yes we can expect some failures - that is the nature of capitalism and limited liability; but this is acceptable amongst a great number of successes. The key point is that these are not individual elements; they are part of a complex web that makes up our global society. Unequal distribution of wealth, water and food shortages in some regions, differences in religious views combined with light passenger security and planes that are easier to fly to create the conditions for 9/11.