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Clem Sunter's take on Risk Report and Outlook for South Africa

Posted By IRMSAInsight, 27 March 2015

Clem Sunter’s take on risk report and outlook for South Africa

 

BY Kabelo Letebele

 

Senior Manager: Group Branding, Marketing and Corporate Affairs

 

In February, IRMSA held a number of breakfast sessions with the aim of launching the inaugural Risk Report 2015 with renowned author and speaker Clem Sunter as the keynote speaker. The breakfast sessions were held in Cape Town, Durban and Johannesburg with an estimated attendance of 600 individuals.

 

Sunter was one of the subject matter experts that contributed to the Risk Report 2015 began his address by commending IRMSA on its inaugural report, describing it as an insightful and engaging report that members should carefully evaluate as they go through their risk assessment processes. “It is important to look outwards in the risk assessment process as much as you look inside. This report is an important tool as business context and outlook can change significantly within a short period of time. Businesses that do not adapt to new realities will not survive,” said Sunter.

 

“Business can change significantly in a period of 5 to 10 years, it is crucial for Risk Management to assist companies to determine the changing rules of the game in order to be sustainable,” he added. He cautioned that often the bigger the company, the blinder it could be to the changes in the game.  This is often due to factors such as bureaucracy and financial commitments made to a particular strategy.

 

As an expert in scenario planning, Clem Sunter uses flags to identify potential risks. A flag helps to determine if there is a particular growing risk trend. Secondly, the flags can assist businesses to identify potential consequences of those particular risks. Using this approach, Sunter highlights a number of flags globally:

 

  •    Religious flag
  •    Russia/Putin flag
  •    The Grey flag
  •    Anti-establishment flag
  •    The green flag
  •    Cyber-terrorism flag

 

The religious flag indicates the growing confrontation between the world’s major religious groups. The biggest impact is on money that the western world now has to put for security, intelligence and weapons. Sunter was uncertain about where the religious flag will unfold in the next 10 years or so, however he was certain that it would still be there.

 

On the Russian flag, Sunter pointed to the growing tension between Russia and the rest of Europe as well as the United States (US), pointing to the sanctions that are currently in place against Russia. He added that there is potential for war as Europe is less prepared for war today than it was before 30s and 40s, whilst Russian military is still strong in various areas of their military.

The third flag is the aging population of the world; “In 1900 the average age of the world was 43 years and in 2000 the average age is over 80 year old,” said Sunter. The pension funds face major challenges to keep up with the aging population; “it is literally now a race between poverty and death,” he commented jestingly. The impact of an aging population is usually a flat economy. He pointed out China is likely to decline in economic growth in the next 10 years or so due to the aging population. 

 

The fourth flag is anti-establishment flag, this is the ‘fury’ that the middle class has toward the super-rich and politicians. The middle class is still under pressure and is certainly not back to where it was during the 80s. He made an example that in the 80s an average age to acquire a bond (in Europe) was 27 and today is it over 40. The consequence of this is that the middle class are now starting to vote for more confrontational governments.

 

The green flag is that of climate change, pointing to the rising temperature data which will increase risks of fire and water evaporation especially for countries such as Australia. Secondly there are rising sea levels which threaten a number of coastal cities. Thirdly, there is increasing intensity of extreme weather events.

 

Before moving on to the South Africa, the last flag Sunter highlighted is cyber-terrorism. He highlighted a number of international cases where malware was used to con major corporates and institutions out of funds. Looking at South Africa, Sunter agreed with the top risks highlighted on the report, namely:

  •         Corruption
  •         Infrastructure

 

He points out that these factors influence our competitive abilities as a country and that if well managed, they can ensure that South Africa remains a highly competitive country. He indicated that for South Africa to stay in what he described as ‘the premier league’ of the world, the following three flags must be managed:

  •  Inclusive leadership – which our leaders need to ensure that everyone in the country works as a team.
  •  Pockets of excellence – pointing out that South Africa is world class a number of areas which need to be honed and nurtured.
  •  Entrepreneurial flag – how we handle SMEs will seriously impact our future in the next 10 to 20 years.

 

In conclusion, Sunter is confident that South Africa can remain in the premier league provided that it manages the flags around corruption flag and infrastructure flag.

 

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