Black Swans & Grey Rhinos
What is Risk?
Among the most common definitions of risk is “A risk is a potential event that may stop you reaching your objectives.”
This could include events at both corporate and service level but also, WORLDWIDE.
The Current Risk Landscape
When we look at the risk landscape, or carry out horizon scanning, this is a way of thinking about the unthinkable and being able to do something about it in advance. What really keeps us awake at night?
We would all agree that the first few years of this decade have been interesting (to say the least). We were just beginning to come to terms with living in our ‘new normal’ and then, just as we have all started to adapt to a post-Covid world, along comes the Russian invasion of Ukraine and a cost-of-living crisis.
According to the World Economic Forum Global Risks Report of 2023, cited in the first 10 risks for the next 2 years, are the Cost of Living, Natural Disasters/Extreme Weather Events and Involuntary Migration, with the cost-of-living crisis ranked as the most severe risk to affect us over the next two years.
Food and energy costs have gone up manyfold and we have all seen a rise in mortgage rates and, coupled with the ongoing effects of Covid plus the invasion of Ukraine, inflation has skyrocketed. As a result of the cost-of-living crisis, we have also seen unrest and protests in over 90 countries across the world, sometimes violent and quite close to home; France being a prime example.
Natural Disasters and Extreme Weather events are things that we now see in the news on an almost daily basis. Floods in Sydney, wildfires in Spain and Canada and recently in the Highlands of Scotland and, of course, the UK heatwaves of August 2022 and June 2023.
Another major global risk is Involuntary Migration. This is much closer to home. In fact, in the 10 years up to the 2021 Census, an extra 3.5 million people were living the in UK. In recent years, residents from Syria, Afghanistan and Ukraine have all come to our country for safety. This involuntary migration is compelled by violence or threat and often ongoing civil war or conflict in another country. According to Home Office statistics, since March 2022, almost 250,000 Ukrainians have settled in the UK.
Black Swans
Let us just talk a little bit about Black Swans; beautiful, elegant and innocent. Or are they?
The discovery of black swans was made by the first white European explorers in Australia in the 18th Century. They saw these big black birds but had no idea what they were or how they should handle them. They had all seen white swans, of course, but not black ones.
The term “black swan” was therefore phrased in the risk management world to describe something we do not expect see. We do not see it because we are not expecting to see it or looking for it. Black swans are exceedingly rare – but beware; they can have a huge impact.
Let us go back a few years to pre-2020. We were living in a fairly peaceful world; warfare was decreasing and there were no major problems in public healthcare. But then, TWO black swans arrived in the form of Covid-19 and the Russian invasion of Ukraine.
Black Swan events? WRONG.
Let us go back a bit further. Russia had already invaded Crimea in 2014 reneging on a promise to forever recognise the independence of the whole of Ukraine, including Crimea. So, the Russian invasion of Ukraine was not really a Black Swan.
Was Covid-19 an unexpected Black Swan event? Again, not really. In 2008 the UK National Risk Register reported, as a risk, a “non-Flu based pandemic”. So not surprisingly, our vaccine programme was up and running really quickly, because the scientists were already developing a vaccine engine that they could quickly insert into the Covid virus, giving us the world-leading vaccine programme that we had.
Grey Rhinos
Let us leave the Black Swans there for the moment and look at our Grey Rhinos. These are risks that are not so serene and beautiful. These are Grey Rhinos. They are large, threatening and looming on the horizon and have us in their sights already. They are ready to charge.
The invasion of Ukraine and Covid-19 are in fact Grey Rhinos. They were already there and heading straight towards us.
It is quite obvious that the cost-of-living crisis the world is now battling with is a direct impact of both these Grey Rhinos colliding. Sanctions obviously have a worldwide impact and fuel prices are going to be particularly challenging if a main fuel supply is breached. Likewise, food supply and food prices are going to be affected once the grain supply is cut off. All this on top of a world recovering from a global pandemic.
Opportunities
Of course, not all risks and threats are devastating for everyone; they can provide a whole range of opportunities too. During the Covid-19 pandemic, online services and sales soared because of shops closing and people having to stay at home and shop online. Local restaurants and pubs diversified their businesses to do takeaway and deliveries and some people were able to start up small businesses.
Elon Musk is another example. He identified that environmental sustainability was going to become really important. He got ahead of the motor industry with his electric car company brand of Tesla. Being able to see the Grey Rhino coming long before many other people, is a great skill to have.
Implications for Local Authorities
So how do these global risks affect Local Authorities? Let us start with the cost-of-living crisis.
As the cost-of-living crisis bites, the issues faced are manyfold with many rabbit holes to go down as one issue just leads to another.
A rise in the number of sofa surfers is expected to drive the increase in homelessness and the number of people homeless in England is predicted to jump by a third by 2024. It is predicted that a “tidal wave” of assistance will be caused by soaring food and energy bills, relationship breakdowns and the end of the eviction bans in rented accommodation.
This of course puts pressure on local authority stock, housing associations and the private sector.
There is, generally, a lack of disposable income for food/fuel. Some families are not socialising or partaking in outdoor activities as they used to, instead saving money for food and other essentials. In turn, children are suffering their early life experiences.
Then we have the housing damp and mould issues where people are using their little cash on food and essentials rather than heating their property; another huge issue for social housing.
Private landlords are also turning away from renting due to changes in legislation and regulations making it more expensive to rent property.
The Future Homes Standard aims to raise standards of energy efficiency and ventilation in new-build homes from 2025.
Homes that are cold due to fuel poverty only exacerbate health inequalities and can cause serious health conditions. In 2019 it was estimated the NHS spends at least £2.5 billion per year on treating illnesses that are linked to cold, damp and dangerous homes.
Cold homes and fuel poverty together also contribute to excess winter deaths with England’s excess winter deaths being higher than the Northern European average.
Natural disasters/Extreme Weather
We are all aware that our climate system is finely tuned where just small variations can cause a significant impact, such as:
- Risk to water supplies
- Localised flooding
- Heat stress for vulnerable residents
- Increased risk of forest fires
- Damage to our infrastructure
- Food insecurity
The Southeast of England is predicted to experience more extreme weather conditions with heavier, more intense periods of rain and hotter, drier summers which bring a serious risk of more frequent flooding and overheating in the summer months.
The Met Office predict that, in the coming decades, temperature records are expected to be regularly broken. Heatwaves are likely to be longer and happen more often with temperatures above 30C for two or more days, triggering localised public-health warnings.
Involuntary Migration
Refugees arriving in the UK need:
- Housing
- Benefits and financial support
- Jobs / Training
- Child and healthcare
- Translation services / education / guidance
Since March 2022 we have seen Ukrainian nationals coming over to the UK. We have in recent years also opened our doors to Syrian and Afghanistan nationals. This has naturally had an impact on all local authority services increasing the obligations across the public sector.
Building Resilience and Mitigation
So, it is one thing to be aware of risks and see the Grey Rhinos in the distance, but it is quite another to have the ability to deal with them or to stop them in their tracks. Resilience is the ability to withstand or quickly recover from a different situation.
All these examples should be well documented on an organisation’s risk register with appropriate mitigating controls in place.
Local Authority websites are a mine of information and advice. They usually cover an entire range of information for the public covering advice on cost-of-living issues and homelessness, signposting people in the right direction.
Resilience and mitigation do not stop at just giving out information and advice though.
Local Resilience Forums are multi-agency partnerships established in response to the statutory requirements of the Civil Contingencies Act (2004). They are made up of representatives from local public services, including the emergency services, local authorities, the NHS and the Environment Agency and involve local flood planning resilience planning.
Some crises cannot be prevented, so business continuity should be in place to ensure a quick response and effective management of an incident, ensuring continued resilience. Ongoing training of staff and information sharing is key. There could be Black Swan hiding somewhere.
The UK government have published their resilience goal as “To protect our citizens from the impact of crises” and has put out a 10-point Resilience plan, listing out the most important resilience tactics for the UK over the coming years. These include a Resilience Academy for training staff involved in emergency planning together with funding for Local Resilience Forums. They have committed to conducting an annual survey of public perceptions of risk, resilience and preparedness by 2025, so that will be interesting to see.
So, the parting question for you is:
How many Black Swans are lurking in your service area?
And how many Grey Rhinos do you know?
References: UK Climate Projections (UKCP), The Met Office, BBC Online 2023, The Guardian Online 2022, World Economics Forum Global Risks Report 2023, Institute of Risk Management (IRM), Home Office Statistic
