How political, economic and climate uncertainty will shape the future of risk
If you can’t be certain, you can be prepared. What the Future Editor Matt Carmichael looks at how brands and businesses can err on the side of caution in risky times.
Imagine it’s 2029. The world likely will be a very different place because it will have been shaped by the plausibly insanely consequential year that is 2024.
Preparing for the future is the best risk-mitigation strategy. You’ll do better work today if you’re thinking about tomorrow. And you’ll be better prepared for whatever the future brings. It’s all about planning and practice.
Risk and uncertainty go hand in hand, and in one critical aspect the world has never been more uncertain. Everything could look very different in five years, considering that half of the world’s population will have elections in 2024. The entire geopolitical landscape could be upended by a full term of new leaders (or existing leaders) in key markets like the U.S., or the EU parliament, which has been setting benchmarks for regulations and protections in the tech space. There are headwinds for globalization and a global economy. There are nationalistic and populist tendencies rising that could make it harder to tackle worldwide problems like inequality and climate change.
Elections are known unknowns. You know when they happen. You know who’s running. You have a pretty good idea what the candidates will try to do when in office. In the U.S., the Republican Party even laid out their plans in writing to, as AP puts it, “dismantle the U.S. government.” Planning for how to mitigate the various risks if one candidate or the other wins should be on everyone’s and every corporate agenda.
And that’s just geopolitical uncertainty, which risk experts consider one of the biggest hazards facing us today, according to the AXA Future Risks Report. But there’s climate change, cybersecurity, economic collapse and a host of other big existential things to worry about.
We have personal risks to consider too. And in this issue, we explore several of them: risks to health, finance, privacy and security, risk to brands and even peril in the way we entertain ourselves. Think of the Red Bull- and Mountain Dew-fueled and GoPro-filmed adrenaline economy. And even just typing your email and password into a form can be a danger these days.
How people cope with risk
People respond differently to risk. It’s one of those things where what’s risky for one, isn’t for another.
Men seem more comfortable with risk than women, according to the Ipsos Future of Risk study. About half say they have a high or moderate risk tolerance compared with 37% of women.
Most adults (82%) say they carefully weigh the cons of big decisions. But when given the choice, 68% say they think about the long-term consequences of their decisions vs. 32% who say they “live in the moment.” And two-thirds of us think it’s good to take risks.
Some don’t think about risk much. In a previous issue of What the Future, 40% said that what happens, happens, and is the purview of a higher power. Others align with the quote attributed to writer Marion G. Harmon that, “Everything happens for a reason. Sometimes the reason is you're stupid and make bad decisions.”
People see things as variably risky. We’re willing to take more chances with our financial health than with our physical health. But we’re most cautious with our online behavior. We think the world is getting riskier (79%), and a plurality (40%) find it difficult to make decisions when faced with uncertainty.
Think about risk in the context of your customers
One way to overcome risk aversion is to build trust, to offer good information (and enough, and from authoritative sources) to outweigh all the bad information that we fear will proliferate with artificial intelligence. This is true for brands in every sector from financial services to automotive to healthcare to food and beverage. If shoppers have a hard time making decisions in uncertain times and do research about purchases to alleviate their sense of risk, then brands should make their decisions feel less risky.
Risk in the public eye
Somewhere between personal risk and corporate risk lie some of the most public risk managers on Earth: pro sports coaches. Take this year’s NFL playoffs. The Detroit Lions were the team many wanted to win to make their first Super Bowl in, like, forever. Playing the eventual champs, Lions coach Dan Campbell twice decided to make a fourth downplay instead of kicking a less risky field goal that would have tied the game. Both times the Lions failed. He played the odds, as he had all season. It was the play that got the team that far. And this time it didn’t work out. When the odds are less than 100%, sometimes you’re going to lose. Managers and coaches tend to fall in either the “go with your gut” or the “go with the odds” camps. The most successful know how to do both: Play the odds unless you know something about the situation that the odds don’t. Hall of Fame baseball manager, Earl Weaver was more of a gut guy, but also understood that situations called for different tactics. About bunting, he said, “I have nothing against the bunt in its place, but most of the time, that place is in the bottom of a long-forgotten closet.”
Risk vs. reward
Balancing all of this is the fact that the biggest risks can come with the biggest payoffs. Of 31 million brackets tracked in the Men’s NCAA tournament, only 10% were perfect after just the first six games. By the end of the first Friday, only eight (number, not percent!) were still standing. You’re not going to win big making the same picks as everyone else. That’s true for brands as well. Risks can come with rewards. Especially if you understand your customers, and even more so if you understand how they differ from your staff and your management. It’s all a matter of balance. Risky vs. conservative. Odds vs. intuition. How to read the quant and interpret it with the qual. But the best way to deal with risk and uncertainty is the same thing we tell our kids: patience, practice and planning.
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