Risk 2018: Planning for an unpredictable decade is an Economist Intelligence Unit report that explores the potential risk environment and the changing roles and responsibilities of the risk management function over the coming decade. The report is sponsored by BT.

An executive sitting in his office in 1998, trying to imagine what the next ten years might hold, would have had to demonstrate extraordinary prescience to be able to pinpoint the key events of the following decade. From the dotcom boom and bust to the extraordinary rise of China, the past decade has been an extremely eventful one, from both a political and business perspective.

Ten years later, in 2008, the world is more uncertain and unpredictable than ever. A financial crisis arising from poor lending standards in the US retail housing market has spread to the credit markets, causing billions of dollars in write downs and the forced resignations of the chief executives of Citigroup and Merrill Lynch. An unquantifiable threat from climate change lurks around the corner, and there are rising concerns about energy security and geopolitical instability. If the same executive were to return to his office to ponder the future in 2008, what conclusions might he draw about the next ten years and how accurate would these assumptions be?

The aim of this report is to consider what the next ten years might hold by drawing on the viewpoints of many hundreds of senior professionals. It is based on a survey of more than 600 senior executives from around the world, 75% of whom were board-level or C level executives. Respondents were questioned about how severe and impactful they expected a wide range of risks to be over the next decade, and how prepared they thought their organisation would be to meet these challenges. Additional questions looked at how respondents expected the risk management function to change over the same period. Key findings from this research include the following:

• There is a high level of optimism despite current financial turbulence. Asked about how they perceived their prospects over the next ten years, respondents were extremely upbeat. More than one half were very confident about the future prospects for their industry, company and the region in which they were based. Less than 10% said they were not confident about the future for the global economy, their industry and their company.
• Optimism about the future is tempered by a perception that risks will increase. Despite their bullish view of the future, more than half of respondents agree that the risks that their company will face in ten years’ time will be more severe. Respondents to the survey were asked about the severity and likelihood of 46 risk categories over the next decade, along with their levels of preparedness for these risks. The detailed results can be seen in our Long-range Risk Grid on pages 4-5. The survey identified 12 risks as being the most threatening over the next decade owing to their high severity and likelihood, coupled with the relatively low levels of preparedness that companies have in place to deal with them. The 12 risks identified as “Tier One” risks are the following:

*Retrenchment of globalisation/increase in protectionism*Oil price shock*Asset price collapse*Emergence of disruptive business model*International terrorism*Unexpected regulatory change*Global recession*Instability in the Middle East*Increased competition from emerging market companies*Talent shortages*Climate change*Increased industrial pollution

• Emerging markets are expected to lead the way. Respondents expect current strong growth in emerging markets to be sustained over the next ten years. Asked to name the countries or regions from where they expected their biggest increase in revenue contribution to come, China was the leading answer by some margin, followed by Europe (including Eastern Europe) and Asia-Pacific (excluding India and China).The mature markets of the US and Australia lagged some way behind.
• Risk management will become a more strategic activity. The trend for risk management to be considered a strategic activity is expected to continue in the next decade. Two-thirds of respondents said that they thought risk management would become more important as a strategic tool, and 58% expected more boardroom attention to be devoted to the function and discipline.
• Scenario planning is a widely used tool to consider the future. As companies look to an uncertain and unpredictable future, more and more are using techniques such as scenario planning to help them map out the road ahead. Among our survey respondents, 26% say that they use scenario planning on a regular basis and 41% say that they use it on an ad hoc basis. Out of the remainder, 29% say that they have plans to use the technique in the future. Just under half of those surveyed who currently use scenario planning(42%) say that they apply the lessons they learn from the process to their strategic planning.