 REG Generally, welcome everybody! If you're in the room, please come and take a seat here. Let me just say for the benefit of the online audience who are joining now and for the benefit of those who are in the room, you came back from lunch very promptly. So you are all winners! You are all winners in the room so far so just carry that with you for the rest of the day, something to feel good about and goodness knows, there aren't that many as we look at the international news at the moment are there. But I think this is a terrific panel because it cuts to the heart of the idea of how you build resilience in systems and that's something that we're all very interested in. It also sets up a very interesting conundrum as to whether there is a dichotomy between growth and resilience or whether the two things actually can work together and are inextricably linked in some sense. So let me introduce you to the panel and then we'll kick off with the conversation here. Let me start on my right. Julia Kluckner is with us, a Member of Parliament for the Federal Assembly of Germany. Thank you for being here. We should introduce Saad Rahim, chief strategist and global head of research at Trafagura here in Switzerland. Trafagura is a commodity trading business, as I'm sure many of you will know. So we're looking for some interesting perspective, particularly in that area, I think, security of supply and so forth. Naoko Ishi is director of the Center for Global Commons at the University of Tokyo, Japan. Good to have you with us. And Sarah Otter is the Global Chief Risk Officer for Deloitte USA. So I was barely in this room just to fill you in before I was mugged collectively by our panel who seem outraged by the very idea that resilience and growth are not connected ideas and somehow they're working in opposition. And Naoko, since you seem to be the most angry, can I perhaps ask you to start here? So what is wrong with the premise that there is somehow a conflict between growth and resilience? Well, I was so puzzled and outraged with this and the underlining assumptions that the growth and resilience are at us are not compatible because what we have learned for the last decade or so is that the sustainable growth needs to incorporate resilience, a lot of elements which is helping to build a resilience. So how have we learned if we still have to ask that question? So that was my source of the frustration and that the world, the entire world has already learned that we cannot just continue the very linear growth only just the nominal GDP kind of growth. And that's why that in 2015 we had the SDG, we had Paris Agreement to incorporate those elements which are currently the economic model kind of you know that they ignored. So at that high cost we have learned how to incorporate a kind of resilience with a natural system more like a climate change but also how to incorporate the social system for human capital because we learn so much about the just transition so it's so important. So I thought this globe learned from the past decade or so that the sustainable development needs to incorporate those elements in it. So that's why that when I got the question hmm are we going back a decade ago to that the COVID-19 that the Ukraine situation added more challenge and some part of this world is now talking about self-sufficiency or security which may actually that then going backward in my own philosophy but then still we need to see that the sustainable growth without resilience will not be really that the other bling that the right thing to the future. So is it growth or is it the ability of communities to form agreements and work together in the same direction maybe through multilateral organisations and non-governmental bodies that's equally as important here because it's interesting you've cited a number of recent crises that we've experienced and a lot of the heat was taken out of those crises ultimately by international cooperation and not necessarily by a go-it-alone strategy. Can I just ask you to expand a little bit on whether growth alone is the solution? Again in fact we have learned what gained as through this past decade particularly after 2012 that the this scenario summit and the G sustainable development in 20 years is basically it's not good enough for the only states to come up with a strategy we need to bring that those non-state actors or stakeholders multi-stakeholders together to really push and not just to chart the pathway but also implement that pathway and just that the other state cannot do that and in addition to that this multi-stakeholder partnership needs to really show the world this is the direction we should go then fits with actually the the sources of a lot of innovation the courage to to bring us to get over the social economic tipping points that's why this and the new that we have learned the past decade or so is extremely valuable and I'm worried that we are losing that importance of international collaboration not just by state but the multi-stake actors multi-stakeholder actors to make it happen the probably that that as you said that the preeminent organisation I think of in Europe is probably the EU and then the Eurozone which has brought a big group of countries together on a lot of similar issues there is obviously still work to be done because there's a lot of disagreement in in many many areas banking union is something I talk a lot about as his capital markets union but of course migration immigration and so on and so forth and Julia maybe this is a good point to bring you in perhaps to share with us some of the the benefits but maybe some of the the challenges at first resilience and growth are the two sides of one coin I would say so and the question is which growth is meant the growth of companies of economy national economy of European economy or common rule based economy worldwide so this is a definition question of course but to your question concerning the European Union so we are 27 members and really different members and each nation has got his own interests of course but we have also common interests and I think we did it or the European Union the commission did a really good work together with the member states in in struggling with the coronavirus for example but but we have also lessons learned from it and I think the benefit is to learn from a crisis in order to implement it in the in the criteria's or the instruments for a next crisis in order to learn to to to to to reach the next step of cooperation second point is the debate in the European Union about migration the debate about defense do we need a common defense a common defense force or is it really effective to to to maintain in each nation or member state a smaller military union so I think we need more common defense strategy and defense financing I would say because 27 different military strategies are not really effective so this is the second point and I would say our advantages are that we have to discuss with each other and have to to to find compromises it's not easy it's hard work I would say as a former minister in Angela Merkel's the last cabinet I was the federal minister responsible for food and agriculture and we have had this presidential of the the presidency we have had and I have had to to to organize a common policy for food and agriculture and you can imagine how different it is look to Spain look to France or to the to the Scandinavian countries so we have quite different agriculture quite different economy and quite different consumers but I think this this pressure to find compromises helps us to understand each other and I was really afraid in them in this pandemic in the in this in the times of the coronavirus that protectionism increased and and and we need to to work more together and and and find out who are our strategic partners what are our values and then fight for it the block is sometimes accused of being slow in policy response and the topic before us is how do you boost risk foresight and resilience and how does the drive for efficiency help resilience or risk eroding it how would the drive for a faster responding EU help or hinder do you think at this stage because I know there have been there have been efforts to structurally reform the voting system perhaps to prioritize those members who are bigger contributors financially but they haven't really gone very far so so far that's it the European Union is growing bigger and bigger or it's it's become fast more members and the family is really big and on the table they're sitting a lot of people or children or what name it and they have their own wishes and I think the green deal or the strategy fit for 55 it's so or to help or to support our industry in in Europe it's so complicated I learned a lot about the inflation reduction act in the United States it's much easier you describe the aim you describe some tools but companies and managers and and they decide how to do it but in the European Union there is a is a love to regulate nearly everything and you have to reach 400 pages in order to understand something and after that you don't understand anything and and sometimes I think the regulations are made for people who are writing the regulations it's a job description and and we need we really need perhaps more pressure or we need more alliance in the European Union we we were allied with the great with great Britain for example they paid a lot we pay a lot and there were common interests there but next year we will have the the the elections and you can realize that the commission or the different commissioners from different parties now point out their new positions what is there what what they have in mind but at least it depends on majority of course but the bureaucracy the documentation the theories we have got it's it's it's not effective it is it isn't so we want the this climate change to stop we want the to be more sustainable we need wind turbines but in order to get a wind turbine plant or a build you need six years five or six years so it's it's it's not possible to reach your goal then wow that's sorry but I love the European Union so so what do you think I mean this is this is a panel about creating resilience and responding appropriately to speed solutions what is the right answer to Europe's dilemma I think to realize the dilemma and we do it that's the first step second is that we realize that there are a lot of crisis and we need partners and if we if we compare our behavior or solutions with others we can learn I mentioned the inflation reduction act and third point is that we are under pressure look at Russia the the lessons learned from this conflict Russia China Iran or India who is working together what are the the is there a new polarized world and and and we are close to the classical partners I would say and we have to underline that and and this I think this is the point of solution if we work together with others and for for trade agreement for example 10 years ago everybody in the European Union thought that we can teach others out of the world we are the on the moral higher higher level we we the sustainable goals everything into agreement into a trade agreement this this wouldn't be a successful and the European Union or the Commission realized that and I think now we are we must and we have to rely on these partnerships and so we need compromise and this is the pressure from outside in order to be more effective now Sarah one of the ironies is that this economic conflict particularly around IRA may actually generate better solutions for the pathway to emissions reduction and a greener planet and yet it is painful in the moment it is painful between China and the United States but it is particularly painful it seems for Europeans at the moment who thought that America was a natural partner on this journey and now they find themselves catching up because European companies are now voting with their feet and moving their businesses to the United States to get access to the capital just give us your take on how this plays because this is more the private sector working with governments to achieve greater goals and inevitably I think the panel would agree largely make the systems more resilient yeah I mean I think one of the things we we were talking about also before the panel is kind of the role of this building self-sufficiency and and does that build resilience versus you know collaboration and I do think it's really important to build on the lessons that we have learned over the last years with Russia with COVID I think that that taught us a lot about um I'm kind of the that value of of collaboration and maybe the self-sufficiency being attractive kind of in the moment but but not for the long run because we're so our economies are so tied and interconnected until you you get you get things like that of European companies coming to the US for example to to capitalize on on what those kind of gaps are and and I would say the same thing when we think about the there's a lot of talk about the decoupling of the US and China economies but if you step back and really look at it that's not really happening right there are sectors and there are interests of different governments that are you know very much real this geomeconomic confrontation that's taking place in terms of sanctions in terms of limitations on transfer of technology but the reality is the economies remain really intertwined in it and and that's good for everyone that they are so that that challenges how do we kind of use collaboration and to avoid that we kind of separate into to camps of self-sufficiency in the name of resilience how do we do that great question for me but as the non-governmental person on the panel right I mean I do think business has a real role here to to step up and and and work with governments around the world and and kind of demonstrate that value that and in terms of growth that that business brings and and the the risk to it should kind of camp separate into self-sufficient can I ask you a slightly unfair question probably but guess you're going to ask it anyway to what extent do you think this narrative has now emerged because of trump and to what extent do you think having a democrat administration that has at least talked the talk if it hasn't necessarily always walked the walk is taking us back to a world that we kind of thought we understood before trump where you had very clear friends globally and you worked with them and you had very clear non-government non-governmental and multilateral organisations that had roles in things like arbitrating labour disputes or trade disagreements and so on and so forth are we sort of past that history or do you think there is still something in our future that will take us back to I'm not predicting any candidates coming forward because history has a way of repeating itself but no I don't think we're past it I do think that the Biden administration has demonstrated a you know a clearly a different approach to it to working with with allies however the the conflict with with china is there and and to be honest I think that's that's not really the one thing republicans and democrats agree on in the US congress is is china um and that's that's a real challenge and I think there's there's an element of needing to make sure that part of it is education right like do do people really understand the impact of of where this could play out um recognizing there are real geopolitical security interests but um but some of the economic sanctions that are more at this point discussed not in place um they could they could really impact in a negative way also people in the united states and their cost of you know their quality of life um and and not to mention developing markets and kind of how that that confrontation could play out for other parts of the world so while we're we're role playing here and we're trying to come up with scenarios that improve resilience improve growth and improve the lot of most of us is there anybody on the panel who doesn't think that engagement with china is the answer that taking a much more confrontational approach is the answer to address what what appears to be shijin pings fragility an attitude towards international relations no i think we all agree then that the china is part of it so you need to engage rather than butt heads yes um um was a fonderline she um called it um not decoupling derisking right it's the derisking question which i'm not sure we really understand do we yes perhaps that's the point that's uh derisking means not to rely only on um on on the power of china we in germany we we don't only make business with china we make business in china and this is um could be riskful and we rely on these um for our um for our sustainable um barmer bender how to call it in english so uh the climate change we want to stop the the climate change and we want to transform our our industry but we are absolutely dependent on this um on on products from china and this is really riskful and um and we don't mean that we must decouple and and and and and struggle with words and and diplomatic heat but but we must be aware of our position that means derisking i would say and find new partners in australia or macosur etc so you know a lot about getting stuff around the world very efficiently from place to place without duplication without frictional costs without additional burdens having multiple partners increases all of those things that's the exactly to your earlier question to say that you know in a sense that it's binary that either you you are saying we're either working with china or not completely without it is absolutely the wrong strategy right and whatever your preferred level of engagement is you still need to say look the realities are this is the system today that you know if you look at battery metals for example you know people are all focused on where's elithium where's the cobalt coming from well actually it's look at the refining processes 90% of that value chain sits in china so you're not going to overnight then be able to replace that do you want to then you know create alternative sources that you can rely on yes but and what i was going to say is as an economist as a trader the thing that we haven't talked about price and cost right which are two things that obviously because why when you're building these systems when you're building resilience right okay so i think you're absolutely right there isn't a trade-off between resilience and growth but there is a cost to building resilient systems right um and we we've seen that repeatedly in the last few years and there are two ways really of building resilient systems i think of oversimplifying a little bit one is to continue building up you know so in a sense almost like a fortress right so you keep building more and more solidity walls a little bit when you're a bit with russia on energies okay we were going to put a lot of our eggs in this basket to try and make sure that that relationship is very solid the other way to then is to build a flexible responsive system right which maybe they could have done if they said look we're going to invest in lng export out of the us or wherever else even though we don't need it today but it creates more supply creates more points that we can then rely on rather than a single point of failure right um and i think you're right where what has been remarkable to us i think it has been the resilience of these systems over the last few years right and again you know we even the trade war back in 2019 covid the recovery ukrain conflict you know by and large i mean we've had major disruptions we've had significant costs but the system has worked and responded such to energies in you know metals all these things are still flowing um but as we look forward we're saying you know one of the things that we keep saying is that we are significantly under invested across all of this right so there is a real cost to then say when we're looking forward to our energy transition goals but even just our growth goals right is that we are we are not in a place that says okay we're going to be able to absorb bigger shocks from here on with those shock absorbers that we had that we spent a lot of money and time resource building over the last 150 years of you know again in oil markets and wherever else but you don't have that you don't have inventory you don't have a spare capacity you don't have the trade relationships and if you do start to get into a little bit more of a breakage into blocks that overly complicates everything now already right and so i think for us there's some real questions out there on that so i mean we all i think we all understand just in time and why just in time evolved as the smartest the least expensive the most efficient way for manufacturers to do things um all of the things that you've just said would imply that we don't go back to that world in a sense and if you take the model that we're going to have to duplicate to build in security and is that what you would take away from both the experience with grain and oil from the ukraine war yes i think that's it right because we moved to just in time because it was the most cost efficient system but it was not the most failsafe most resilient in the sense i mean again it has proven to be fairly resistant but again at a at a significant cost so it really it's about where does that cost sit right because you don't want to invest it now because you know that that's money going out the door and then not have to have that resilience later right but the problem is also you you build systems and then you go oh well that was a black swan event we we couldn't have seen that coming and so many of these things are not black swans they're what i think Xi Jinping terms gray rhinos right that they're actually right in front of you and you just choose not to see it so when you're building these systems and you say okay how would we actually stress test this right what if you were to see you know things that go out the the saudi attack you know the the attacks on on abcake in saudi i don't know how many remember this but in 2019 you know okay we were at that point we had much more in way of inventories and everything else but this took five million barrels a day of oil supply out of the global market that could have been enough at a different time to crash the entire global economy right because there's no backup to that system but it costs a huge amount to do that to hold spare capacity so when we're trying to maximize profits we're minimizing then this redundancy right and i think that's the kind of the key i think that's a really interesting point that comes out of this conversation that largely you all agree that you have to build some duplication into the systems now to give you that redundancy in case it's it's needed um we're going to open this up to questions so please indicate with your hand that you'd like to ask a question at this point and we'll hand out the microphones and while um you're deciding whether you want to ask a question or not i'm just going to ask uh neoko a really unfair question do you do you think do you think japan has exhibited resilience for the last 40 years after the collapse in the economy and the the the property prices that it that that happened i mean from an economic perspective it almost feels like japan has never really come back to the growth rates it exhibited but yeah you look at japan and everybody seems to be having an okay time now and it's full of tourists now and there are lots of great cultural things to do while you're there i know i'm massively stereotyping but what has did japan exhibit huge resilience or did it fail uh you know even for the last one day here many people said to me that oh i love japan so that then apparently people do appreciate the japanese culture then i'm being a tourist and then so so i acknowledge it at the same time being a japanese after particularly for the last 50 years and knowing that how japan is sinking gradually gradually and losing a lot of you know influence or relevance uh in the global economy i don't think that then we managed to get the resilience in our system rather we are because part of your social cohesion we were kind of sinking together without creating a much of disruption and in the sense that we benefited from this social cohesion at the same time we really don't have the power to get back and to even understand that if we are sinking or not and if we don't like it what to do so that to me we are not necessarily presenting any kind of plausible that the strategy for other countries to get in thank you very much for the answer yep you've got a microphone yeah could you just give us a little bit of background so we know where the question's coming from and direct it to whoever you'd like to answer sure uh rob rashat from canada i work for a company called fordanaet we're in cyber security industry and given that i like to um ask i guess i would direct this um uh to our friend from deloitte um in terms of all the risks to growth uh where would you place cyber risk particularly as those risks are starting to move from the enterprise to critical infrastructure knowing that there's significant organized crime and state players involved sure so i mean when we think about cyber risk it's one of those when we think about enterprise risk management and we think about our heat map it's always up there it's never going to fall right there's always a new scheme a new criminal a new attack method that's out there um i i don't i wouldn't predict that we've kind of mastered that but i i do feel like there is some more stability um that we see in terms of at least from a business standpoint there's been a heck of a lot more investment um i think there's a better level of understanding than maybe there was a few years ago about how impactful cyber security is um so in this panoply of risk that we're looking at it's always one of the top risks um does it rise above geopolitics does it rise above you know the current um financial stability interest rate environment it's hard to say those things as you compare them but certainly a very top risk we've seen it again in economy markets where you've had ransomware attacks on the largest you know gasoline pipeline in the us right and again thankfully you're able to solve that but if that had been more than a few days that would have been again economically ruinous and we just and we don't have a backup system for that line and then in the the interaction now between geopolitics and cyber security as well where so we say we have a few possibly state backed organizations who who are part of some of these attacks right and we saw that even in europe the largest copper smelter went down after the day they said we weren't going you know and these are things that are important right and and have not yet i think risen to that level of discussion um yeah gentlemen that question killer for chief economist for barclays um it's really a question to the entire panel you know i'm not convinced it started off with a great farm farm protest that resilience and growth was not exclusive and it all went together but you know we ended up talking about redundancies about voluntarily creating inefficiencies you know the sahid you know finally brought the issue of price and costs and you know and and now in the end we may be playing with semantics and redefining what kind of growth we mean but fact is it does seem to me something that is a less efficient world and you know typically efficient in growth is related so that was my question to the panel and in one quick thing on japan just because it came up i really think we need to start talking a bit differently about japan when we talk about growth in particular gdp per capita in japan and i think issue you would you would you would uh uh uh confirm this has been as good as in other countries they just have low population growth and declining population but per capita if that is what we're going to measure our people are individually japan is doing well they're not sinking if you want to talk about resilient i mean 40 years and you're still the third largest economy right so there's some resilience there absolutely so absolutely um but let's take the other point because i think that's that's interesting to you i think it's a pushback it's a pushback on growth and resilience yeah yeah do you want to want to address uh yeah now when okay if there is any kind of short term conflict is it may be true but when we talk about growth it's going to be longer term a sustainable growth i think we are talking about from that point of view the longer term sustainable growth it is that then at all of at all with the planetary system because we don't really price that the natural capital and it's not really at the sustainable because of human capital because we completely uh you know that the not ignore but then that then under current system we really don't do justice to the global south so that when i see this huge challenge coming any time soon from climate climate system or natural system and also that the injustice to the global south i actually don't think the current growth is a the good thing to to have and in that sense the growth in in my own definition and resilience will be compatible sorry just quickly from my side as well right is to build these redundancies it's still investment right you still have to then employ people to go build some of these things so there's still okay and you know you can argue that the most efficient use of capital in the short term again maybe not but also then what you don't want to have is to find out that you don't have a resilient system because the cost to growth at that point could be significant right and again we did see that in Europe last year we didn't really have the quite as resilient an energy system as we wanted so the cost became enormous right as opposed to saying okay we'd invested maybe some of that earlier we would have built more redundancy and more more points of access right so just it's a little bit i think there that depends on your definition so i think there's also the the what do we mean by short term and what do we mean by medium term because if we if we think kind of well we've got to manage a crisis every few years or so then then that you're right it's investment out the door today that we might take advantage of in five years from now but we've just seen crisis upon crisis upon crisis you know that the short term is getting very squeezed and my point of view concerning growth what do i understand with word or under the word growth it's not only benefit for a few people or a few companies i think growth means or needs or no resilient needs a strong economy i would say in order to invent solutions or to to make researchers and researchers not only in one country make researchers together and and find solutions second point is growth means well-being and welfare for people not only in the european union it means growth to to to become stronger and have a not a same mindset that's not possible but but a mindset concerning climate change for example and what sustainability means combined or included with growth and then i think this makes us stronger in or in order to be more resilient in order to be faster for example to invent vaccine or other things or to finance the transformation to to to to finance it we we can describe all our aims or wishes and in germany we have such an emotional sometimes in a ideological debate concerning climate climate change concerning the energy sources what could or should we use or not and fridays for futures or younger people they are sitting on the streets all day long and and want to to um yes to to to get into the discussions so i think we must be realistic in order to describing our aims and goals and has to point out how we can finance it finance it on the long run and to be successful and and so i mentioned it at the beginning i think that resilience and growth are two sides of the same coin um any more questions let me let me oh yep let's get you a microphone over here then we can good we we've got about five minutes left so let's uh let's um take the question and see where we are afford to be resilient without growth sorry can you afford to be resilient without growth that's oh my goodness in five minutes but thank you would anybody like to take that one on quickly oh i think we will be basically quickly i don't think no no okay no yeah so there you go i think that's that's all you're getting that's all you look let me let me just finish with the final question here because the most in the globalized world now the the the most well i guess it feels like the most immediate crisis we've seen recently to do with the financial system has been in the banks and we all came through 2008 and we all thought never again we're never going to give those bankers any more money and let them bust the system again right and here we are yeah 2023 and um we're suddenly giving the banks money and we have um institutions like the fdic which have overreached their rules of operation effectively to provide stability in the u.s banking system and we've had a government that's had to step in here much to people's huge annoyance here and basically shut down credit swiss and merge it with ubs apparently breaking all sorts of conventions and uh understandings about what was acceptable to do with banks let me wrap up with the final question here because sometimes it seems to be resilient you have to either break the rules or make them up as you're going along in the case of this most recent financial plumbing problem is everybody on this panel comfortable that it goes no further or are any of you concerned that actually what we're just witnessing is the first round in a Tyson-esque boxing match that is going to run a few more months yet who would like to take the question I mean for me it's it's Buffett's famous quote about we don't know who's swimming naked till the tide goes out and this is the tide going out we don't know what the risks are how many people need what a cdo was in you know 2007 even the bank's CEOs didn't know what that was right so it wasn't until the stresses started to show up that you were able to say oh this is where the risks are and we were talking about this at lunch with some people where it's um you know the amount of leverage that is in the private side this time that is held is significant right and we don't know that until the market actually happens and that's when you will start to I think see some of the these cracks emerge so I'm not saying that this is a cascading financial crisis like 08 but that there are stresses in the system that are probably not adequately looked after but again you could also argue that we are too afraid of passing costs on to consumers and to businesses to be able to actually take some of the medicine that that is needed anybody else fancy a go we never know which yet really so so politics for example has to react in the situation we are and and you can't predict what you you try to predict but if a situation occurs you have to react and then you have to to to um to decide what's worse or what's better not the best but in this case and um I think um yes we have a lot to do it's it will never end yeah I'm not sure if I feel reassured after because it seems to me it's hard to create resilience against something you don't understand yeah and I'm not sure how many in the room except maybe one or two of the bankers may be know how how much is buried undoubtedly in two or three years from now we will look back and say well we perfectly well had all the information in front of us to know what all the risks were and exactly how long this would last and how this would unfold but of course in the moment it's never that clear right you get the last word I think the question is that the full is paying the price or the additional cost of this residence actually I think that the people that business demand that that is at the end of the day it is their benefit the politicians that the policy makers some of them government are quite short-sighted at the end of the day it's all us that the who are paying for the lack of you know the foresight so I hope that you mentioned a little bit like the business can demand more and I think that the business and the people not only global south north but also global south should demand more about the system needs to incorporate the resilience and that the citizens should be ready to pay for that and that's a great final message to end on I think so thank you very much to our panel for this very very interesting conversation thank you