 Hello and welcome to the session titled Risk Reset. My name is Lutfe Siddiqui. I'm a visiting professor at the London School of Economics, LSE Ideas, and an adjunct professor at the Risk Management Institute in Singapore. So risk reset. Let me try and win the award for the most understated statement of the year. Let's just say that this year has taught us some important lessons in risk management and risk resilience. How do we frame risk versus uncertainty? How do we distinguish between risk that arrives as one impactful shock versus risk that builds up incrementally in a series of small disturbances sometimes amplified by my actions and your reactions and the feedback loop between them? How about the psychology of risk or the politics of risk? Why is it that it seems to be the case that it's easier to raise money for, to put it crudely, it's easier to raise money for coffins than it is for medicine? Why is that the case? How do we justify allocating resources or spending money to protect ourselves, our companies, our communities against risks which may not materialize in the end, especially when the pressure is on all of us to be super efficient? How do we deal with black swans, the truly unknown unknowns versus the grey rhinos, the risks that are visible but not compelling enough for us to do anything until perhaps it's too late? How does this all look from the perspective of government or the perspective of a global technology services company or a provider of insurance whose job it is to put a price on risk? So that's what we will be talking about and before I go to our distinguished panel to ask them for their perspectives, let's get warmed up a bit. Let's try and get you the audience involved straight away with a question that you can vote on. Could we have the question please? This is on Slido. If you haven't joined a session earlier today, you have to go to slido.com. The hashtag is S-D-I-S or the QR code. Please answer this question. So looking ahead into the future, what risk is the world most unprepared for? Least prepared for? Climate risk, 53%. Still moving around. Let's give it a few more seconds. And what we will do is at the end of the session, we'll come back to the poll again and see if the needle has moved. So I see that climate is still leading, although rupture in social cohesion is creeping up now to 28%. So it's really climate versus social and cyber is creeping up, but it's gone back down again. Okay, let's give it 10 seconds and we will close the poll in 10 seconds from now. Could we close the poll now please? Thank you very much. So it looks like climate is still the undisputed heavyweight champion of the world and the second place was between social cohesion and cyber creeping in towards the end. So allow me to go to our first panelist, Her Excellency Dr. Rania Almashat, Minister for International Cooperation in the Government of Egypt. Over to you Dr. Rania. Well, thank you very much, Professor Siddiqui. And let me say that the introduction you provided really sets the tone for what everybody's thinking about. I mean, what we have learned from this crisis is that there's a next new normal. And what I mean here and I'm very happy with the poll that started at the beginning. There is, we are all prone for another crisis. It may not be a pandemic. It might be a cyber attack. We were very lucky this time that we were able to function with our internet's working and our technology being a very key tool in getting through this environmental or climate crisis is another one. And this again puts the honest on more than one player in any society. If I'm talking about the governments, governments have for very long been bearing the brunt of what is known as the protection gap. And that is coming in to help mitigate the impact on vulnerable groups that has happened through public finances and public finances have in many instances been affected negatively. And it takes so much time and reform to fill in the coffers again. We saw 2008 and how much I'm now I'm talking as a monetary economist and an ex-Central Bank and IMF. And here you see the cost of fiscal spending and how much it affects debts. And we see the debt rates that are globally now on the rise. The other very important point is that we have all been affected by disruptions and supply chains. And that means that corporates and businesses, the word resilience is one that requires to always be within the DNA of a corporate and therefore asset managers need to make sure that there is enough investment in what creates resilience for a corporate. This is not to be belittled or overshadowed in any way. Something else when we talk about insurers and so forth, how do we make sure that we also have sustainable models for corporates, sustainable models for businesses and putting all of this together, stakeholder capitalism, meaning that the government, the private sector really have to have one language, an identified language that takes risk into account. It's no longer a department within a corporate or a department within a government institution. It really has to be within our psyche. And this is what has been labeled as societal risk compact. We need to have a new societal risk compact where companies, governments, regulators, the risk advisors all come together to really define what are the steps that need to be taken to make sure that we do have resilience all the time, because resilience is what will make us stay relevant. If we don't have that within what we do as a government, what corporates do, we are going to be prone to face more issues down the road. The other very important lesson that we've learned is that and I'm here, I'm talking from a government perspective, reform is a continuous process. In our case, as Egypt, we were able to withstand the socioeconomic implications from COVID because there were a lot of reforms that happened between 2016 and 2019. So there was enough foreign exchange buffers on the fiscal side. There was a primary surplus, so you were able to come in quickly and try and mitigate some of the health requirements, as well as the cash transfers and the social safety nets. But again, if more crises were to happen, which are not country specific, but now more global and all of us get affected, that requires, again, a very agile way of thinking. Let me conclude by saying, through the World Economic Forum, we have a regional action group for the Middle East, and in that regional action group, a group of my colleagues from policy making institutions and governments in the region, as well as CEOs from the private sector have put together a stakeholder capitalism agenda, where we look at, one of them has to do with risk governance, more inclusion within the society, making sure that there is that environmental stewardship, and also a focus on the use of technology to mitigate risks by depending on the goods of the fourth industrial revolution. Let me conclude there. Thank you very much, Dr. Aranya. It can't be easy being a proponent of international cooperation at a time when the world seems to be pulling back into de-globalization, more nationalism, more protectionism, truly applaud you for that. From stakeholder capitalism to a captain of capitalism, let me invite Mr. Chandraprakash, C.P. Gurunani, Chief Executive Officer of Tech Mahindra, to give us your views, please. Thank you, Minister, and thank you, Professor Siddiqui, for a brilliant reset. I'm a little surprised that, as you call me the capitalist, I'm a little concerned that none of us have taken an economic recession as one of the big factors. We have all seen governments in debt. We have all seen how trillions of dollars have been committed to revival of economy. We have taken into account that the social unrest is bound to increase because of the increase in unemployment. To some extent, the reality is during the pandemic, last six months, 50% of new adopters have come into the digital world. But at the same time, there are people who cannot adopt, at least bigger countries like Egypt or India. I mean, we do know that we have the last mile problem. Whether the last mile problem is telecom reaching the last person or the last mile is because a smartphone which will make the connected world, connected education, connected health, or a connected citizen services or connected government happen, there is still a huge gap. But anyway, let's go through some of the responses that the corporate sector has in a way worked with World Economic Forum to respond to the challenges. Climate change, we all discussed. Companies like Tech Mahendra have committed that 50% of our energy consumption would be by renewable energy. We have agreed with our board that we will become carbon neutral by 2030. We have taken very aggressive science-based target. And why am I repeating this part is Professor Siddiqui only to say that if corporates can lead by example, and if they are able to partner with the policy makers and the corporate, then we have a right to make that loud statement that we are equal partners in the progress of the community or the society or the country. Clearly, when you look at some of these sustainability objectives, you need to take into account that there are disclosures. And if we can all agree to a certain level of disclosures, to me, whether it is a format or a framework designed by World Economic Forum, or today what we follow Dow Jones Sustainability Index or a carbon disclosure project, I think we need to have a common standard across the world. Secondly, I do still believe that science is a bigger equalizer. The social gap or the digital divide, I think we need to take into account that the cost of providing technology has reduced dramatically. And I'm sure minister would agree as a policy maker is that if today we did not have an AI tools, we would not be in a race for vaccine. I mean, today every country is claiming that they have their own solutions. Or at least the sum of the advanced countries like UK, US or Switzerland probably are in a better shape. But in less than a year for a pandemic, if we are going to get into the third phase or the fourth phase of trials, we have to recognize it is the technology which is the equalizer. And technology also creates its own issues. Like for example, the survey coming back and saying global cyber attack. The fact is, in my opinion, it is going to be the higher priority because we are so technology dependent, we are so data dependent, the number of devices which are now in excess to the network, every bulb or every Fitbit or whatever that device that we all wear, the so-called health monitoring device or steps monitoring device is a gateway to a cyber attack. So I think the reset also requires a resolutioning. And my again opinion is that technology is the bridge between the policymaker, between the citizen and between the corporates so that we can all agree to a common agenda, common minimum agenda, and how we can address some of the world challenges. In my opinion, we are unprepared for whether it is the next pandemic or whether it is the next safety issue or it is the next security issue or the sustainability issues or the societal issues. Thank you very much. We'll come to a bit more detail on some of these issues that you've just brought up, CP. So digital, both empowering and also perhaps a source of new risks. Let me turn to the group chief risk officer of Zurich Insurance, Peter Gieger. Peter, over to you sir. Thank you. Look, I'm not even sure I call COVID a gray rhino because all I hear is that those are really rare and pandemic are something that is kind of notorious to humans. They have happened in the past and they will happen in the future again. What is amazing is that kind of humans were surprised by a risk that was waiting to materialize and the writing was all over the wall. I'd go one step further. I'd say we were actually probably less prepared in many instances than we would have been 10, 20 years ago because the optimization of production processes, the highly tactical short term optimization has taken out redundancy and slack. And I'll take European hospitals. How can it happen that they don't have a stock of personal protection equipment and are surprised that they're just in time supply chain actually breaks? And I think that's what we need to learn. We need to learn that redundancy creates resilience and that the systems need to allow for the unexpected and the nature of the unexpected is that we don't know it. Now, I wouldn't put COVID into that again because that was actually very foreseeable and it's kind of frightening if something really unexpected happened. I think part of the issue is that humans have a very short term memory. We're very good in forgetting the threats of the past and I think we're conditioned like that because it's good for our mental well being. If we were to worry constantly about all the things that can happen to the world and to us, we wouldn't get out of bed in the morning and I'm talking as a risk manager. I think you need to be an optimist and we are conditioned like that. The point is when it comes to risk management, we have to get over that human conditioning. We have to learn to deal with rare events. We have to learn with life-threatening events and I think if we take that away from the crisis, I think that's a positive. If we're not walking away now talking only about COVID because the next threat is going to be completely different. So let's prepare for what we don't have on the agenda as challenging as that sounds. What role can insurance play? We heard a lot about that. We praise ourselves as experts in risk management and at the same time you heard all the stories that insurers couldn't pay for the pandemic and let me illustrate that. There is a saying that insurance is the principle where the many pay for the few. The pandemic created a situation where the many needed to be paid and obviously the capacity of the insurance market is just not big enough. Switzerland alone created an economic loss the size of the global insurance market capacity just to give you an example. So Switzerland could have been insured but nobody else. That can't be the right answer. And again as a risk manager I would suggest that we need to invest more in mitigation and it's like in flood resilience it's much cheaper to build a dam than to clean up the flood damage not only financially but also from a human cost perspective. And I think for me that's the big learning here. The cost is actually not bearable to society if we let the risks run and materialize. We have to invest in mitigation. Mitigation is so much cheaper from every angle and how do we convince kind of society to make these investments when the house is not burning because once it's on fire it's too late. Thank you Peter. So quite a few issues. Maybe I'll start with you in the follow-up round. We're also getting questions coming to us through Slido which is then being put on WhatsApp and sent to me. So I apologize for looking rude and I'm looking into my phone. It's not Facebook I can assure you. So the question I have for you is I agree that you need to invest in mitigation up front and I don't think anyone is going to argue with that. The political economy question is not so much what needs to be done. Why is it that what needs to be done does not get done? Presumably because leaving things redundant has a cost of carry attached to that. How do we square that circle? How do we make it economically viable? Look economically viable it's a matter of the perspective you take because if you're taking a steady, stable environment assumption and ignore the risks you come to different conclusion that it's at the core of the sustainability question. What is a sustainable system? What is a sustainable company? What is a sustainable country? Is it sustainable? If you look at it in a steady environment for the next 360 days, I'd challenge that. Sustainability to me means that you're able to cope with changing environment that you're able to cope with threats that your environment necessarily poses on you and that sustainability is something that I think we have lost sight of and I think we need to go back to it and then the economically viable takes into account things that can happen and basically accounts for it. You can monetize it, yes you can but I don't think everything is being expressed in money when we talk about flood damage. The human tragedy, what's the value of that? Avoiding that is a value in itself so it's not only about financials but from a government perspective it's really kind of do you govern for the next election or for the next generation and I think that's the challenge in front of us and climate change is the classic example. You're not really likely potentially for the right measures but you may save the planet. Minister Runia, if I may come to you, all three of you have mentioned the need for greater cooperation whether that's within the country, across sectors, corporates, private public partnership or internationally between countries and I'm thinking of you mentioned the financial crisis. I'm thinking of the 2009 Gordon Brown G20 meeting Jan 2009 where they came together in London and we felt that that had a really stabilizing effect because it was a unified global response. It's hard to imagine something like that in the current geopolitical environment. How do we deal with that problem? I mean of course 2009 and 2008 were made easier by the, sorry about that, they were made easier by that multilateralism and fast global response. We're not seeing that as much as we did before. Nonetheless for all the reasons that were mentioned there is no escape from it and I believe that now there are new terms coming out but they aim for the same thing. If we're talking about the great reset, if we're talking about stakeholder capitalism, it's just another way to say that there has to be a multilateral setting and the actors within the multilateral setting go beyond governments and that is I think the essence of what this crisis has shown and I do agree with Peter that humans are myopic, they forget but the implications from COVID are going to be lasting longer than any of us expect and that is going to push all of us to collaborate whether we like it or not because nobody has the silver lining themselves, sorry the silver bullet themselves. It is really a coordinated effort that can provide a meaningful outcome for different populations. For instance also Mr. Shander when you mentioned the importance of digitalization and how the digital divide can actually lead to more societal problems and these societal problems in one country will also have implications on other countries so there is that need to make sure that the objectives are identified and this whole concept of SDGs and we're in this forum this week, the UN week, the SDGs are the goals where countries have come in and said this is the common denominator where we need to work on objectives that affect humans and citizens whether it's health, whether it's gender, whether it's clean water, the 17 SDGs really push towards a better life and that requires the mitigation of risk that was mentioned. In our case and I call it as Minister of International Cooperation my role is to promote economic diplomacy and economic diplomacy requires multi-stakeholder collaboration. When we work with line ministries and development partners to design an ODA project or a development project, everybody needs to be around the table, the civil societies there, our development partners there, it could be bilateral, it could be multilateral and really it is through that economic diplomacy that we're trying to push more engagement and let me just conclude by one thing, because we tend to forget and because we tend to forget crises we also tend to forget successes and what is very important is that when people work together and a good story comes out we have to keep on pushing that good story so that it is you know everyone wants to see success and be part of it and that's why within the ministry we started a global partnerships narrative where we collate the effort that we are doing with our development partners whether multilateral or bilateral under one theme and concept that we're trying to push domestically and globally and that is people and projects and purpose so that's another way to push for a good story. That's a great idea to celebrate successes and advertise them so that we update our self-beliefs and what's possible and what's best practice. CP, so if I could come to you now, stakeholder capitalism I confess that as recently as January this year when that was the theme of Davos there was some skepticism as to whether it's rhetoric words only or whether companies are sincere and serious about implementing stakeholder capitalism or not. Eight months on it now looks like that for a variety of reasons including for the enlightened self-interest the commercial interest of companies it is now something that has a lot of momentum going but you also hear from companies that look we are in the middle of a crisis right now we are on the cusp of a recession the economic strains on our financials and our balance sheet is going to be tremendous can we talk about all of these things next year let's deal with the immediate here and now ESG sustainability all of this is for another day how do you respond to the pressure of of that sort of a thought process. I think again Professor Siddiqui you know just to rephrase what the minister had to say it is not about celebrating success but it is about I am rephrasing it as remaining positive and remaining purpose driven because the fact is that there would be speed breakers there would be reasons why there would be setbacks question is whether we want to talk about the comebacks instead of the setbacks now to me again you know whether it is sustainability or whether it is any other initiative ultimately we have to put it in a weighing scale and say is it corporate social responsibility or is it what is a necessity the reality is that all those initiatives have been rewarded by the stock exchange if you are a more sustainable corporation if you are a company which uses green marshals if you are a good citizen to the community that market has always rewarded you if you are seen as short term I mean the market has discounted you now whether you call it as a P multiple or whether you call it a measurement of a market capitalization similarly I again want to reuse the same sentence that I used in the past that if you look at all your response systems the reality is you know Peter is right that when it comes to all of us know what the inevitable is but we will postpone it to the last minute right I mean human nature but ultimately if we all try and put all the pieces together all the the risk reset things that you discussed whether it was economic recession or whether it was the cyber security and most of the guys voted for climate now it just tells you that let us take some of these as given and there will be stresses because the social unrest is going to come because of either healthcare employment or education or you know the way we need to address even the unforeseen issues the if you go back and look at the way the last six seven months have passed it is a technology which is enabled everything then the house has worked that is why we don't have unrest on the roads right everything in the house includes communication media entertainment whether you call them Netflix or you call them whatever everything in the house has worked because somebody is delivering the stuff to you and everything is in a way got actually accelerated during this period online shopping robot deliveries digital and contract less payments in my industry 125,000 employees for tech Mahendra 92% work from home it couldn't have worked if I was not creating a cyber secure environment if I couldn't do virtual meetings seamlessly so I can again repeat is it is not capitalism it is I think becoming socially responsible and leveraging the tools that each one of us has more effectively to solve some of the immediate issues great thank you let me now turn to the questions that are coming from the audience and I will throw in a couple of mine as well I will read out a few questions and you can raise your hands if there are some that you wish to answer yourselves one question is about the fiscal load of the immediate relief that has been offered by various countries the minister mentioned that a country like Egypt or Singapore that have had buffers they were able to deploy but at some point the assistance provided has to hit some balance sheet somewhere so how do you deal with the potential fiscal challenge that is waiting in the wings there's a question that asks why is it still the case why is it the case that if investing in time and resources in prevention and risk mitigation is indeed a positive return on investment then why is it that more business leaders and policymakers haven't done that so far there is it's up on the screen there's a question and we're trying to solve all problems with money how do we deal with topics that cannot be turned back on that go beyond the tipping point I assume this is to do with the climate issue and I want to read all of them up just one more to do with methodology so perhaps for Peter is there fundamentally a different framework a modeling exercise that we will now undertake going forward and how risk is predicted and framed and priced to how it used to be done in the past so that's the marketplace who would like to answer which one let me start with the first one because it's it's actually an easy one humans have a huge sentiment to knowing the future and in insurance and other industries we invest tons of money in now we call them predictive models we call them artificial intelligence we call them all kinds of things to tell us the future the trick is the future is unknown and you cannot know what is unknown and I'd be I'd be very satisfied if we just recognized known probabilities better I don't think we'll ever know the future what life would that be by the way if we all knew our destiny but but we can do a much better job in recognizing visible probabilities i.e. a pandemic is quite likely event I mean that's not a one in a hundred years that's a much more likely event why why does it come that we ignore something like that so I don't think it's a modeling problem it's a perception issue beyond that with insurance invest in in better pricing absolutely will it will it solve the insurability of pandemics not at all so I don't think the answer is necessarily embedded modeling this is there is much more philosophy than algorithm in the problem maybe on on the fiscal question what I can say is you know one of the outcomes of this pandemic is that everybody is going to be in higher debt whether that's the household whether that's the private sector whether that's the government and there will be a moment where we will have to have a dividing line and see how can we really assess that debt situation of course there's a lot of quantitative easing that is happening and and you know that will have its effects and as cp was mentioning it makes itself on on on wall street as well but but that is a that is a reality that restructuring will come into play there will be many companies that are going to work on that restructuring for for for different agents in in in an economy so that is definitely one of the fallouts of of this situation I think I think the the important issue is in reinvestment because there will be debt restructuring but we want to invest in order to of course we don't know the future but as much as possible mitigate possible risks or do investments better in technology better in AI better to to give incentives for companies for the esg and and so forth and there's this point about profit and purpose there is there shouldn't be this trade off and I think that's what was mentioned that companies are able to get returns by being responsible and and citizens customers are really voting now by their feet buying a product for a company that is responsible and it's and governments are going to have to face a situation where it's going to be a very competitive landscape and unless you have a proper environmental policy unless you have proper incentives for doing good uh you know companies might be hesitant for the first time today we see uh stress tests for banks taking into account climate uh and investments by banks into uh uh a climatically sound project so it's I think I think as as was mentioned uh models aside there is a philosophy which is coming out and you asked a very important question why do people pay more for coffins uh rather than uh otherwise and I think it's the point of sympathy and empathy and as this crisis is creating more inequality more divide uh the you know people will want to and will call for bigger investments in things which uh help governments corporates and themselves avoid risks going forward thank you if you would like to take any if I just would like to add just a few sentences uh number one you know I I belong to India and in a state called Rajasthan which was a lot of small kingdoms and even when they had an economic challenge because of the drought because of the floods the only way to actually come out of a crisis was spend your way through because otherwise the unemployment otherwise so if you look at the most beautiful palaces of Rajasthan they've always been built during a crisis some of the road networks have been built during the crisis so I think we need to spend our way we need to take into account whatever balancing factors whether it is air pollution or whether it is cyber security we need to balance all of that but I don't think there is a there is a way any other way but to spend your way through thank you one more question here about the apparent conflict or the opposing trends of increased digitalization on the one hand and also increased digital decoupling on the other side of the fragmentation potentially between a china sphere and the us sphere I think it's a question for you cp how do you deal with this tension between the two I mean I do agree that there is a digital fragmentation I agree that while digital technology has brought a huge economic and societal benefits to much of the global population but unequal access lack of global technology governance a lack of what I would call the frameworks to be able to pay for the people who do not have the same level of exposure I mean I thought the government's were very good at doing that job that Peter can pay for the poll somehow when it comes to the telecom or the digital fragmentation we haven't done a great job I think the new technologies that are now coming in particularly the space technologies because of the way they are structured that through the low orbits of satellites I think this problem will be behind us by 2030 and till then I mean we still have 10 years to go I would urge the government to work with the private sectors and it is not that people have not tried different projects Google tried this balloon project Facebook tried this electric poles project because they were all trying to get new consumers but don't treat them badly because they're trying to get new consumers because they're helping the government objective also of like a river water needs to be made available to every citizen I think the digital bridge needs to be made available to every citizen and we we do have methods to do it right right thank you very much we're coming to the end of our time I'd really like us to do that poll one more time so if we could get Slido back up please at the start of the session climate change had 42 percent and the second place was a tie between social cohesion and cyber at 28 percent each so let's see what the poll looks like right now climate change has been resolved in the last 45 minutes oh it's coming back up again I think Dr Rania has really brought the economic aspect to the fore cyber attack remains at 27 so fairly static and social cohesion going back up again okay let's I think we can freeze the frame over here I guess it looks like apart from the next pandemic which I suppose we're feeling very confident about our ability to deal with it because hopefully it's a we've had plenty of rehearsals unfortunately this year but it looks like the other risks are fairly dispersed so it could come from anywhere and we're ending the session today with the risk of a rupture in social cohesion as the most important risk that the world is unprepared for going forward so it's it's not a very happy note to end on but I must say that I'm uh we've had an energetic and a positive session so I'm really grateful to our distinguished speakers uh Peter Giger, Chandra Prakash, Minister Rania thank you very much for your time and thank you to all of you in the audience for being with us and with that we bring this event to a conclusion thank you very much