Skip to Content
Political Risk

The Coronavirus and Risk Governance

Daniel Wagner | February 21, 2020

On This Page
Group of people wearing medical masks

The coronavirus is a timely reminder of the pervasive threat of pandemics and the need for a robust and resilient response from the world's governments, institutions, and businesses. Terrorism, cyber risk, climate change, and resource nationalism all have global implications and require a sea change in the manner in which global actors approach problem-solving and an effective marshaling of resources.

While too little progress is being made on a routine basis, a paradigm shift is, fortunately, gradually occurring, setting the stage for achieving more meaningful risk management outcomes in the future.

Emerging and developing nations have spoken up loudly about the inequities in the existing global decision-making apparatus, and they are being heard. Even the five permanent members of the United Nations Security Council recognize that the current framework for the council's decision-making was literally created in and for another century. It is a matter of time until the leading emerging and developing nations have a stronger voice in that body. Although the United States, Europe, and Japan continue to lead three of the four largest multilateral development banks (the World Bank, European Bank for Reconstruction and Development, and the Asian Development Bank), China's Asian Infrastructure Investment Bank and the New Development Bank (both based in China) represent a fresh new approach to development finance.

New organizations and standards have proliferated at the national, regional, and global level, which has created both breakthroughs and bottlenecks in terms of how new laws and regulations are crafted and implemented. This represents progress, due in large part to the ongoing pressure being applied to the status quo by state and nonstate actors. The longer-term challenge is to ensure that the change that does occur is more in favor of the common good, which is in everyone's long-term interest. Change can only occur while including the existing power structure because it is needed to approve change for the future.

Searching for Risk Management Balance

So, a balance must be struck between those in favor of maintaining the ancien régime of risk management and those wishing to disrupt it. This represents a real challenge for businesses, which must, at the same time, embrace change while not tipping the scales too far in any direction. It is a delicate balancing act, requiring the right mix of open-mindedness, adaptability, and accountability. A realistic approach to achieving risk governance standards that are at once bold enough to foster real change, but balanced enough not to rock the boat too much, requires an organizational culture that fosters systematic information sharing and has the ability to evaluate critical information in an efficient, thoughtful, and timely manner.

As it is clear that a meaningful approach to risk governance cannot be achieved in isolation, a diverse range of actors that an organization may not have been accustomed to including in the decision-making process should become part of it. Given the range of challenges organizations confront, and the number of actors on the stage, the solutions are unlikely to be simple and straightforward—rather, by definition, they will be complex and ambiguous.

By definition, risk governance is intended to address risk management in a broad context, which includes as many actors, thought processes, and mechanisms as is practicable. It is not merely the organization that should benefit from this process, but society at large. How the information is obtained, analyzed, and interpreted will naturally impact the outcome. Since change is the one constant in the management of risk, our ability to embrace change and adapt to it will, in the end, determine how successful and effective our efforts will be.

In thinking about how to create a framework to achieve this larger objective, some of the basic questions any organization should be asking itself include the following.

  • Who should be involved in creating an enhanced risk management framework?
  • What model or framework that already exists should be used from which to build a customized model that ideally meets the needs of the organization?
  • What scope of global operations should be included in the model?
  • How and from what sources will the information be collected, prioritized, and evaluated?
  • What are the likely direct and indirect impacts of the model?
  • What are the comparative costs and benefits of pursuing each given course of action?
  • What needs to be done to enhance the long-term effectiveness of the chosen course?

When considering the answers to these questions, it should be borne in mind that there will be setbacks and things will fall through the cracks. Arriving at the best methodology will certainly not be achieved with a single straight line. Long-term objectives should always be kept in mind; focusing on short-term goals will inevitably generate a secondary set of challenges. When mistakes are identified, tackle them head-on—delaying the inevitable will only make a solution more difficult to achieve.

Developing a New Approach to Risk Governance

The coronavirus is but one example of a plethora of slowly developing risks that pervade the global landscape. Whether a pandemic, financial crisis, or rising ocean temperatures, they generally take weeks, months, or years to evolve to the degree that they become a real problem for people, governments, risk managers, and decision-makers. In order to be thoughtfully addressed, we must both learn from the lessons of history while also having a distinct long-term future orientation.

An effective decision-making framework to tackle such risks should include a focus on systemic issues, decisions that are based on facts (rather than opinions or observations), flexibility along the way (to account for new factors that may influence the process), and acting with the firm belief that recommendations that will be made are both realistic and will be acted upon.

Risk governance is all about realism, teamwork, effective communication, and ownership of actions and decisions that were taken or not taken. It is not supposed to be simple, fast, or straightforward. Getting it right is hard work. With the stakes so high, no government or organization can afford to adopt a cavalier approach to the subject. The key messages are that operating in a cocoon or a silo, thinking about new challenges in old ways, and failing to have a long-term orientation will not get the job done. Fighting this virus will require collaboration, open minds about new alternatives, involving new actors in the process, and turning the pyramid upside down.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.