Risk Consulting, issue 2/2022
We are living in a volatile and ever-changing world. Whether we talk about the increased prices of fuel, food shortages emerging because of the war in Ukraine, or the rise of extreme weather phenomenon posing unprecedented environmental challenges: our world is transforming from a conventional, predictable reality to one that is far less certain. We can also look at the results of the lockdown during the pandemic and decisions taken as a result, such as travel restrictions, which helped usher in monumental steps in the transformation to a more digital and efficient way of working and living.
In 2022, the theme for the Federation of European Risk Management Associations (FERMA) Forum event is Transitioning together. We can see, for example in the accelerated digital transition mentioned above, that new services are bringing increased transparency while opening new opportunities for businesses.
Work to be done, but also notable progress
According to the European Commission’s 2022 Digital Economy and Society Index (DESI) report, the European Member States successfully advanced their transition to digitalisation during the pandemic years. However, the study also highlights that there is still plenty of work to be done. For example, 5G network roll-out has been slow to materialise, and industry and businesses are making only moderate progress in the integration of AI (Artificial Intelligence) technologies and Big Data solutions into their operations.
Furthermore, digital skills are still an issue. Simply, without a digitally savvy workforce, the challenge of applying innovative technologies will remain a factor that will hinder transformation and slow progress – this issue must be part of our transition towards a brighter future.
There is notable progress being made as well, let us not forget. Even with the coronavirus still actively circulating, we can see that international travel has rebounded in earnest. Also, with remote working becoming part of everyday life, the transition to a digital reality has taken huge leaps forward over the past two years. Even more recently, while oil and gas prices fluctuate, the renewable energy market continues to grow thanks to increased demand for cleaner energy sources.
Preventing losses and managing risks
Disruption is part of the new normal, and clients having a solid business continuity plan is more important than ever when it comes to preventing modern-day losses and managing risks. The risk of underinsurance remains a serious one, having accurate values in place will help clients overcome an accident or incident.
From breaks in global supply chains to issues with securing critical equipment components, there are also more intense and increasingly frequent weather events impacting operations. One contributing factor to weather-related, expensive losses is that we tend to build and operate in areas that are not suitable from a geographical perspective.
Lessons from losses
Looking at some of lessons we have learned from losses, the availability of spare parts related to various equipment continues to impact the cost of repairs and downtime. There have been cases, during COVID-19 especially, where experts and specialists have not been able to travel to repair damaged or malfunctioning equipment. This has caused added costs and greater business interruption than anticipated.
Another lesson comes with the scarcity of spare parts. As an example, frequency converters were previously readily available “off-the-shelf,” however today the product has a delivery time of some three to four months. Similarly, the price of metal is very volatile, which has led to additional costs in multiple cases, as metal is used both as a building material and to produce various products and materials. Let’s also not forget the cost of fuel, which continues to fluctuate. In fact, fuel surcharges are starting to appear on invoices from contractors to help them manage the cost increase.
We are on a journey, through challenges and adversity society and businesses alike continue to deliver innovative products, new digital services, as well as inspiring applications and novel solutions. We can deliver a more sustainable economy, through a robust transformation, one that sets the course for prosperity and a healthier society, while further integrating the potential of new technologies, renewable energy sources and digital opportunities.