Leaders need to focus on emerging risk now

There’s no rest for the wicked. And in a climate of recovery and bounce back there should certainly be room for celebration. However, with the driving need to make structural changes involving talent at the highest levels, it’s imperative that businesses – particularly those in engineering and manufacturing – look ahead to the next emerging risks and develop and use talent to navigate these going forwards.

Why is this important? Well, take the pandemic as a glaring example. Few organisations had pandemic response plans in place before March 2020. Yet, that was an emerging risk that was actually pretty predictable. We might not have known the shape of what would unfold, or the exact timing, but experts had been warning that a pandemic was coming.

Not all risks are predictable, but some are. Emerging risks are ones where we can see hints of difficulties on the horizon and good leadership and forethought can help ensure we have plans in place to mitigate risk, but also gain opportunity.

The nature of emerging risks
By their very nature, emerging risks aren’t that clear. Like an unknown pandemic looming like some far off sci-fi movie, there are things about the supposed risk that are unquantifiable. They can be ambiguous, chaotic, uncontrollable and certainly uncertain. And that makes them easy to ignore. Channelling your inner ostrich, it’s possible to bury your head in the sand – many emerging risks are far off, and may not even happen.

However, all emerging risks carry with them the risk of economic loss. But they also carry opportunities.

If you stand with your head out of the sand you can actually plan competitive advantage by capitalising on opportunities whilst reducing vulnerabilities and exposure.

What can you do about emerging risks?
I’ll come onto the main emerging risks that are rearing for all organisations (particularly within engineering and manufacturing) shortly. But what can your organisation do about emerging risk and why does it matter for talent planning?

Planning for different potential risks takes time, expertise, and strategizing. It is a leadership level endeavour, and it requires specialist knowledge. Each identified emerging risk should have a business owner. This person should be responsible for creating and managing the plan where that emerging risk is concerned. And that’s where you need the right person. For example, emerging risks within cybersecurity require different specialists compared to emerging risks in supply chain management. Steve Culp in Forbes states,

“Risk teams should be putting emerging risks higher up the awareness and action spectrum. It’s no longer enough just to monitor and report; organisations need to be better prepared to take quick action while developing an internal culture that can better guard against the emerging risk.”

As we know, cultural change requires leadership.

Start by identifying the risks which are most relevant to your organisation. This may be risks that are most likely to occur, or ones most likely to be catastrophic, or ones where there is greatest opportunity. Then utilise and develop leadership to take responsibility for these different areas.

Emerging risks of coming times
I’ve identified the top 6 emerging risks as I see them for engineering and manufacturing businesses. However, this list is far from exhaustive and takes a broad brush approach. Individual organisations may find that they have different higher priority emerging risks.

1. Cybersecurity
Failures in cybersecurity loom large in risk terms. The effects could be dire, as we know from those businesses that have already had their vulnerabilities exploited. This is particularly relevant because many businesses rushed to put in place systems to enable remote working during the pandemic and they aren’t as yet revised as long-term arrangements. Additionally, in a sector increasingly shaping itself around blockchain, cybersecurity risk has the potential to be catastrophic.

2. Supply chains
Watching whilst supply chain disruption continues at all ends of the spectrum, this is a huge emerging risk for those in engineering and manufacturing. We are all acutely aware of the difficulties our sector faces. At the moment, much of what we are doing is firefighting and responding. This disruption is only likely to get worse; we need to plan for it.

3. Environmental, Social and Governance (ESG)
As I write this, we are in midst of regular bulletins from COP26. Without a shadow of doubt, the reporting requirements and the stringency of regulations within the ESG arena are only going to get more intense and pervasive. Noncompliance will lead to fines and penalties and that’s before we look at the risk of reputational damage for failing to be ahead of the ESG curve.

And let’s not forget the enormity of risk posed by climate change itself.

4. Skills shortages
Many sectors are experiencing skills shortages, but within engineering and manufacturing these are extreme.

The State of Engineering 2019 report from Engineering UK painted a shocking picture: there is a shortfall of 37,000 – 59,000 in meeting the annual demand for core engineering roles requiring level 3+ skills. That was before the pandemic played havoc.

Skills shortages are a time bomb when it comes to emerging risk. However, businesses that look to develop talent and support development and retention will thrive.

5. Diversity and inclusion
Closely related to the above emerging risk, within engineering and manufacturing, we need to pay heed to challenges with our talent, specifically within the forum of diversity and inclusion. In a sector which has struggled in this regard, we need to develop authentic strategies that enable us to navigate skills shortages. Lip service won’t be enough, it needs to be genuine.

6. China
China was already hugely dominant in manufacturing prior to Covid-19, as well as other sectors of the global economy. However, we now need to really focus on what’s going on here. Relationships between China and the G7 nations are wobbly at best, yet this links back to our supply chain issues – often we have no option but to partner with state-sponsored Chinese organisations, but that opens up huge vulnerabilities. Our decisions are increasingly becoming politicised.

In addition to these emerging risks there are also notable ones in the areas of remote talent management, corporate tax changes, organisational cultural degradation, business model changes (such as Direct-to-Consumer (DTC) models), Intellectual Property concerns, Tariffs and Trade, robotics and artificial intelligence and more.

Managing emerging risk is complex. That doesn’t mean you should avoid it. Instead, it means making sure you have the right talent to entrust them to.

With the right leadership in place, risks needn’t be terrifying, they can be planned for, and if you’d like help with finding the right leadership, give us a call today.

First Executive Recruitment is here to support you.

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