Protivti's Top risks 2020, Peter Richardson, Hamish McRae and Paul Middleton

Good morning everyone good morning and welcome to this splendid location I hope you’ve been enjoying the breakfast and some of the views this morning and welcome to our presentation on Top Risks 2020 this is our eight annual survey and we’re going to take a slightly different perspective on the way we illuminate those top risks during the course of our presentations this morning and I hope you’ll I hope you’ll enjoy them so welcome my name for those who don’t know me already is is Peter Richardson incidentally for those who still do know me already my name’s still Peter Richardson it doesn’t change My name is Peter Richardson and I have the pleasure of being the UK Country Market Leader for Protiviti Protiviti is a change management consultancy but we have risk management as part of our DNA and that mixture I think is particularly interesting in the context of the presentations we’re going to make this morning and looking at the impact of risk risk management and the opportunity that that delivers for for change and that’s probably why our mission as Protiviti is defined as delivering or bringing confidence I should say in a dynamic world for our clients and our tagline is “Face the Future With Confidence” and I think again a lot of what we’ll be talking about today is a dynamic world and the opportunity that that brings for a different perspective on confidence in that world so that’s me just a quick show of hands maybe how many members of boards executive management do we have here today a good handful thank you very much how about those who are risk management professionals many more handfuls may be internal audit equal numbers again thank you line of business line of business leaders a small handful compliance maybe yes all compliance people are at the front in see that I don’t quite get that might be but interesting observation and others oh okay I’ll talk to you the other thing you might be thank you we live in an amazing time we talk quite a lot about what I call what I refer to as a Perfect Storm a Perfect Storm of change which which is characterized by globalization or Deglobalization digitalization regulation, cyber security and ever evolving business models and the impact that they have on the drive for talent and different needs for talent in different ways from our people and I call it a Perfect Storm because it’s both it’s both a storm of risk and opportunity all of those things are are changing the way the environment in which we operate means our businesses might operate and thrive within that environment and it’s also a workplace in which there’s phenomenal transformation in how we work where we work and the tools we use to support our work increasingly in our business particularly as there’s a great drive for for agility for flexibility ability for use and different use of applications and tools in particular technology to allow our people to work more effectively in different environments and I think that’s going to be particularly significant again as we discuss things today I’m going to be hearing more today of course I’m sure about include increasing regulatory scrutiny about focus on technology and the extent to which that is potentially increasing risk at the same time as creating opportunities for growth and speeding up the art of the possible and I’m looking forward to hearing our two speakers in particular in their perspectives on that just quickly as far as the overview of the session today is concerned how we’re going to run this we’re at point one at the moment that’s good

I’m going to introduce shortly one of our two speakers our keynote speaker Hamish McCray who’s going to be talking about world economy in the 2020s and the risks and opportunities that that might present Paul Middleton one of my Managing Directors here in Protivit is going to be he’s going to be introducing our study and talking to the detail within that study in our conclusions from that and we’re going to do a question and answer session after the speakers have spoken rather than interrupting the presentations themselves those presentations are probably going to last about 50 minutes to two an hour between them which will leave us with a good half hour at the end for for questions intending to wrap up round about 10 o’clock with with refreshments afterwards I know you’ve already had a big breakfast but there’s there’s more to follow apparently there’s so there’s some there’s some some buns and coffee and stuff afterwards as well and that will be of course an opportunity to meet people and do some more networking if you have time to do so the format’s a little bit different to what we normally do normally we present that the the report itself and and look at that pretty much exclusively really through through what I would call the Risk lens and we’ve We have challenged ourselves today to look out a little bit further to look broader than than the direct report itself and look more into the impact of those risks and the opportunities that they might create and challenge ourselves to look out broader still and think think maybe beyond where we are today so I hope you enjoy today’s session we are actually recording today but it’s only I was at the front that are being recorded we’re not we’re not recording you directly behind us and are in front of us and watching that so I hope that’s okay with you all please sign up and look at our LinkedIn channel there’ll be reports from this on on that too we obviously want to hear from you and we’re looking forward to the question-and-answer session as well and we look forward to to answering your questions and encourage you to ask as many questions as you wish during that session there are no fire alarm tests due so the bad news is that were on the 34th floor and if there is a fire alarm we will be walking and a lot of a lot of stairs to get out of the building the exits are clearly marked in here to at the side and one at the back so if there is a fire bell ringing that it is a real fire alarm I’m afraid just a final comment really this is a quotation from John Augusta Shedd a ship in the harbor is safe but that’s not what ships are built for again I think we’ll be hearing quite a lot about the intent and the purpose in the direction of business during the course of today one other quotation from John Augustus Shedd he said he who thinks but with lips thanks but in part the true Thanksgiving comes from the heart and I truly thank you all for attending today I hope you thoroughly enjoy it I’m looking forward to it immensely and let’s get on with the proceedings so it’s my pleasure now to introduce Hamish McCrae Hamish is well he calls himself a hack I think he’s probably a little bit more than a hack he’s a futurist he he he wrote a book actually back 25 years ago called the world in 2020 so it’s fascinating to hear now in 2020 from from what Hamish which might be looking forward to beyond beyond that point the New York Times actually described Hamish as or alluded to him as a writer actually with 20/20 vision such was their impression of his his work back in 1994 I think when they when they reviewed his book he has a letter from Bill Clinton who described him as a man who knows all the good and bad about America he he’s a renowned economic journalist he was the associate editor and chief economic commentator on the independent he writes now for the indie for the Mail on Sunday he was financial editor of The Guardian he likes also for the Evening Standard and he’s got a fascinating perspective on the world looking forward of risk and opportunity in the economy in which we

operate ladies and gentlemen I’m pleased to end Hamish McRae well thank you so much for that kind introduction thank you also for taking the risk I mean you know these people are good at risk but I always feel it’s a bit of a risk asking a stranger to come in and be let loose on your clients so thank you I’m gonna talk about the way the world economy might develop over the next 10 years or so and try and pick out both the risks and the opportunities as they as they unroll and if we were having this conversation we’ll have a conversation afterwards ten years ago we would have been pretty glum I mean we would have seen the worst recession since the Second World War was since the 1930s actually and we’d have seen the worst banking crash since gosh I don’t know bearings maybe 1930s whatever and we would have been on the cusp of the longest bull market that’s ever occurred so risk is an opportunity biggest risk biggest single risk I think for us all is that globalization goes wrong over the next ten years Kofi Annan said this about five six years ago he died as you know two or three years ago that it was actually unstoppable well it doesn’t look so unstoppable now and actually I’m going to show you some numbers that suggest that it’s certainly in terms of its peaked in terms of goods in trade and then if it starts to retreat from that well this is the view of Jack Ma globalization is good when trade stops war comes well I’m not quite we’re quite as radical as that but managing managing that transition is going to be tricky for the world and we will all be affected by it giving you the structure of what I’m going to be saying over the next 20 25 minutes remember remember remember risk is always an opportunity three big points point one there is an economic cycle where are the risk there point two there are long term structural shifts taking place in the world economy away from the present developed world and to the emerging world particularly to Asia and where are the risks and opportunities there and then thirdly with technology we’ll come and see a little bit later some people who got one instance of people getting technology rather wrong story one the cycle we know there is a cycle whenever a politician says there is no such thing as we have eliminated boom and bust you know that’s the time to to run for the hills we know there’s a cycle we’d be lovely if we did but we don’t we go to get the timing right and we don’t get the amplitude right and we can’t do that so what we have to try and do is create systems which are robust as to the cycle this cycle has been artificially supported by zero interest rates this must be nuts it must be wrong when I hear someone on the Bank of England’s Monetary Committee is saying well you know the economy has got rather weaker and you know that means that we ought to cut interest rates by a quarter of one percent I just find I just think is madness this is what these clever highly paid central bankers say but do you really think a quarter of One percent off is going to make people say oh gosh you know we really known by now that by our house what actually generates these things is confidence I would have thought having the Bank of England say going to take a quarter of presenter of interest rates might actually damage confidence more than increase they could certainly doesn’t help the pension plan so it must turn down soon and we have to make then I think an intuitive judgment about the likely way in which it might turn down being aware

that our intuitive judgment is probably going to be wrong and my bit just to know I think there will be a mild dip probably next year conceivably back in this year probably next year but a mild one and I think the problem is not the amplitude of the dip I think the problem will be the struggle pulling out now in a year’s time you know we may be completely wrong but I think at least the the useful thing if you’re worried about risk is to think about the structure of the cycle and what it might be and then do the what-ifs if interest rates shoot up some graphs I’m an economist so some graphs this is a very simple one it shows short-term interest rates and by the way if any of want this presentation you can you can you know I’m sure it’s going to be available we’re gonna send it to you the only thing I would ask by the way is by all means share it but don’t sort of post it and within our lifetimes we’ve had the US Federal Reserve target rate at 19 percent huh we’ve had European rates said minus 1/2 of 1% yeah it’s kind of pretty big amplitude of swings what I would say is short-term interest rates in human history have never until now been negative hasn’t happened the first time so that is says to me this is not perhaps too good an idea and it’s not good perhaps lasts too long if you look at long rains we have a run in Britain going back to 1700 and interest rates normally interest rates between now and 1700 have never been as low as they are now it’s the consoles and the 10-year guilt when something is never as low as it has been now you were there and say well wait a minute this isn’t right this won’t last and that I think does then create a risk are we prepared for nought interest rate normality they will go up will they go up fast will they go up early none of that we can know but I think that we need to ask the question what if rates go back to normal faster than we expect whose bust I have we got balance sheets that are robust enough to cope with that what does that do to equity prices actually probably not too much but what does it do to bank balance sheets across Europe if yields on German debt go up to 10-year yield goes up to two and a half percent which would be completely normal the social costs of ultra easy money in a way almost worried me more why ultra easy money gives my boosts asset prices sink a lot of assets you do very well and the more assets they have the better you have and that rides social pressure you know wealth inequality is tended to come down in Britain sorry a bigger pardon income inequality has tended to come down wealth inequality has gone up and I think there’s a lot of our our social pressure as a result of the increase in wealth inequality bank of mum and dad great if bank of mum and dad can get the children on into their first homes so we’ve had to do not so good if bank of mum and dad can’t do it and I am profoundly worried about the social costs of that and that shows up in all sorts of things such as the gap between the young and the old politically at the moment which is wider than I think probably ever I mean when I was young you know this was the sixth you know they I think the young were pretty crap very good generation the young now are having to work jolly hard and they may have nutty politics I had hope I’m not offending people here I probably am but would you write I mean but but in a sense you can understand it if you look at that interest rates and asset prices suppose in my view of the cycle is wrong it could be wrong I think robust for that and then I think

also what are the opportunities there are opportunities created if you get the cycle right be robust now have resources that other people don’t have when things turned down and you will all in your bits of world and perfect life lives and you you will see things that I can’t see their story two I can show just a couple of two or three I think three graphs on that because it is happening slowly we tend not to notice each year any change but we’re living through the most extraordinary transformation of the world since the since the Industrial Revolution because we’re seeing the rebalancing of the world towards what we call the emerging markets away from the old developed world in 1820 the world’s largest economy was China and the world’s second largest was India it’s why I’m afraid Britain’s wanted to sell dope to the Chinese and and take over India all the other economies in Europe were tiny by comparison that is now show you in a minute going back to a world pre 1820s in terms of world world wealth world power however that is happening because of globalization and there is this pushback against globalization from the right from the right who Trump wants to try and impose trade controls push back against China and from the left who seek globalization as a massive evil because it’s run by the large companies and those of us in the middle I think need to defend globalization you know as best we can but to acknowledge that it will be under pressure it’ll be under pressure for the rest of our days I’m actually ok with it I think it’ll change its nature but but but we’ll come to that in a moment has globalization people this is the changing nature if you look at the top line that’s global exports as a percentage of global GDP left-hand scale it’s peaked it peaked before Trump he’s an example and a function of it not not actually not actually the cause of it if you look however then a trade in absolute terms middle line also stalls but look at the bottom trade in services much smaller but still rising and what I think we’re going to happen to globalization is a shift from moving Goods around you you just make wherever you can make things you know reasonably effective but you probably won’t need to make things anyway you make the money you make them money on the design the marketing and you make the money on the services associated with and I think that if globalization moves from moving goods around to moving money and ideas around and as is happening that is also a great opportunity so I think the changing nature of globalization globalization stalling is a risk the changing nature of globalization is an opportunity second graph in this little section is comes from HSBC HSBC have done a really good piece of work and you can google it and it comes up and I’ve just drawn this graph from that work of a computer model of the world economy in 2030 this is a sort of improved version of the Goldman Sachs bric’s model and there it’s really really good I love it and this shows the world in 2030 what is the largest economy probably China and if China doesn’t pass the world and pass the U.S. in 2028 as I think on their model it’ll pass it in 2032 you know it won’t be right as detailed this is right has two thrusts so the pecking order of the world economy in 2030 is China U.S. India Japan Germany UK UK starting to edge away from France it’s quite bullish about the UK not because of Brexit or any of that stuff because of our age profile of our population I’m actually

quite bullish about the UK over the next ten years once we’ve got this present disruption disruption past and then you look down well Brazil Brazil doing all pretty well Russia right down at number 13 huh have a look at this later if your interest did all go onto their site I won’t labour it but it’s a really good piece of work it’s the best piece of work that I’ve found some big questions well for us how do we remain outward-looking in a world where power is shifting it’s kind of obvious but source of risk that we don’t what can developed economies do which emerging economies can’t do as well he looked at the number of unicorns being created in the world US and China are number one and two it depends a bit of how you do the data China sometimes in some measures number one India number three we’re number four but we were very poor fourth we’re best in Europe but that’s not good enough we’ve got be better than that we’ve got to think globally what can we do that India can’t? Well it’s difficult we can do education very well in this country I like to think we’re inative we can do we do finance very well we can do entertainment very well you know I Fintech to Fleabag you know we do that those sort of things but I think we have to be pretty cool at asking ourselves what can we really do because we’re not gonna pay for all this lovely City and spread it a bit more or through the country if we’re not just better doing things what happens if globalization stalls I’ve talked about what opportunities are we missing you may probably have seen things in something I’ve said where there are opportunities that that I can’t see it seems to me that in the education innovation space there are most of the opportunities story three technology huge impact of communications everything from we all have this in our daily lives I mean I have it absolutely in my daily life because if I’m writing now for the Indy web site I have to write in a quite different way from the way I write in the mail on Sunday I have to write shorter I have to be aware that my readers are not mostly well actually come to think of it mail on Mails website is the largest newspaper website in the world so you know but I have to think globally if I’m on the Indy I’m writing for a twenty seven-year-old in San Francisco because that we have more of our readers in America that we do in the UK I have to try and not offend the woke 22 year olds in Britain but if you’re writing mail and Sunday you’re writing for the Home Counties successful prosperous you know people doubtless but you in this room maybe we are aging how do we turn an aging society into a positive rather than regarding this as a drag on the economy I get furious when I see those ads you know for product how will you manage a million in retirement and you see a chap you know sitting sailing a yacht or something really you know someone who’s able to you know be fit and active and sailing yacht might only actually do something you know like do some work don’t think it’s less you’re building yachts you see what I mean I think we have to think of a changing workforce different employment market and of the environmental and societal stress created by new technologies I’m going to show you three graphs on this I had two on the previous ones but before we do anything I want us to go to room this was the inauguration of Benedict the 16th 2005 and this was the inauguration of his successor have you seen that you’ve seen this one before have you some of you have 23rd Pope Francis and it’s the same view he’s somewhere in the distance the iPhone of course was the invention in 2007 that as Steve Jobs said something comes along that changes everything Steve Ballmer at Microsoft didn’t spot it well! Microsoft Microsoft did all rise out of that they

are now the same size company of as Apple they’re you know they’re they’re fine they scramble through, Nokia what still exists but didn’t see that risk coming and so technology has it was the largest manufacturer of phones in the world 2007 now it doesn’t make them at all it’s a software this was an interesting one but you know so big risk let’s look at some data on social networks and you’ll see some risk here the gray lines these are the top social networks worldwide in October last year top four gray ones are all the US orange ones are all Chinese so where are the Europeans nothing there this is a world dominated by the US and with the US systems being stolen shall we say by the Chinese huh we’re not there we’re just not there and that seems to me to be a whole set of risks associated with that AI strings of risk associated with that and this is just a list of the jobs that are at risk done by some consultants admin and secretarial and retail sales right up at the top we know that and then the whole high street risk and then all the mortgages secured on high streets all that and down at the bottom health care education construction you build something like this you still need people you know there’s a crane just out the back you still need a friend of mine who works for a big developer he said you know send you there we’ve got to have a Lithuanian with a shovel I mean you’ve got to have people to do it so that is less at risk but the whole Middle area they talk but journalism at the top somewhere there we’re very much at risk and there are the environmental risks and I’ve just put on here a string of those which the UN and Nature have put at their top and there’s habitat destruction there’s disturbance there’s over exploitation and there’s global warming and pollution I won’t go through them in detail it’s something you might want to look at later if you if you’re doing that but I mean the key point is we’ve got to have a thoughtful and measured appreciation of the various multifaceted risks that that we know are there in terms of the species affected the biggest single one is habitat destruction due to agriculture some big questions how to society manage social media and within that there are a whole string of compliance issues what happens to news my wife had to do a review for the government last year what happens with news and how do we protect news in the Cairncross review how do we protect news in a social media environment and fortunately I had about four secretaries of state since then and I’m not sure Nikki it’s quite at the top of Nikki Morgan’s priorities at the moment but we will see how do you manage AI positively how do we use it I’m a great bull but I think it’ll take away drudgery work and there was actually a very good speech by a chap from Nokia in Davos two days ago saying he thought this would enormously increase productivity and I’m absolutely by that I think that AI is that AI and Big Data come together to label us to increase productivity in the service industry so and I think that’s that’s really really important and I think technology will create better lives for us more but when this we will be missing things and that something perhaps to talk about my top risk and this is the real fear. I think the cyclical risk my top risk is that the Cure has been worse than the Disease we’ve created too much inequality with our cure and that’s worse than the slow pull out global risk we just mismanaged the rebalance worlds America and China and China and India mismanaged that relationship got to get that right

I know we can’t do anything about this room but we have to be aware if they do mismanage it that will affect us all technology and this will be implicit we lose faith in the benefits I’m passionately believe there are huge benefits I was distraught when the Indy stop printing and I was completely wrong we’ve doubled our readership lot of journalist lost their jobs and that isn’t good but we’re now hiring again and then finally just to are we going to see within the next 15 20 years the twilight of democracy will we be strong men/women with men/women around the world will we lose faith in democracy that does seemed to me to be a most profound risk but the prize for getting a right is huge human beings are the same we have the prize of Technology we can recognize fears have we’ve got the resources we’ve got the resources available to fix things we just need to have common sense I would have finished with one slide what unquote it comes from Barack Obama and I just I’ll paraphrase it because it’s it’s long if you had to choose a moment to be born and knowing nothing about who you would be rich or poor your race where you’d be born knowing nothing man or woman know nothing what would be the moment in history you would choose to be born and the answer of course is now and I think that still holds true just about all the fears we have thank you so much [Applause] Hamish thank you Hamish thank you so much for your fascinating analysis and insight and context for the next part of our presentation which is now going to be presented to you by Paul Middleton as I said at the outset Paul Middleton is one of my managing directors in in in the UK in the London office I’m delighted now to hand over to him to present to you thank you So good morning everyone it’s great to see you all here and thank you for the introduction Peter and Thank You Hamish as Peter said I’m Managing Director within Protiviti and I look after some of our strategic clients relationships in the UK my background is in financial services and so I apologize in advance for any bias I have towards that industry as I speak to you today you can only imagine my horror when I was told that I was speaking today to have to follow Hamish and as such a fantastic speaker and then I was told and actually you’ve got to speak after a triumphant video as well so it’s a how do I follow that my marketing department are very very kind they very thoughtful and said don’t worry it’s fine you just need to bring a survey to life no small ask and there won’t be many people there either so thank you the first thing I wanted to do is I thought I’ll try and beat Hamish on the quote so I saw his quotes I saw the Obama references that I’ve got a try and you better than that everything flows nothing abides everything gives away and nothing stays fixed who said that any classics scholars Heraclitus the Greek philosopher 535 BC said

this and what’s he saying here well this is about resistance to change this is about how we resist change how we resist new technology in today’s world how we might not look at new technology how we might not look at the needs of our customer base so be day old risks in Heraclitus this time will be they new risk to us today this is about what he’s saying here this is about how we manage that change and really how we manage those risks so the point here is that once you embrace that position once you embrace that position of wanting to understand your risks and wanting to be able to manage them we think within Protiviti you’re on the right path you’re in a much stronger position and you all are a number of you conducted and and were part of our responding group within that survey and you’re here today so that for us is a is a fantastic important step so for the next 20 minutes or so I’m going to talk to you about the survey the survey that you’ve responded to in a survey you have the results in front of you and and in particular the top 10 risks the top 10 global risks that you see a lot of the themes I’ll talk about will come back to themes that Hamish talked about and Peter talked about at the very start but ultimately for me these are the three key things that I’ll come back to time and time again you’ll see that there are a number of internal risks but also I’ll be stressing the external risk Hamish has told a lot of my thunder but I’ve got to try it’s there a number out there I’m also going to be talking about how those risks are interconnected and that web of risks and understanding that there is a web is an important step and lastly I’m going to be touching on how you go about it and not just casually looking at them but being bold being proactive and doing something there are themes that will come out so it’s important first tool to give you a little bit of context on our survey this is the eighth year as Peter said that we’ve done this survey we had over a thousand respondents those respondents cut across financial services consumer products manufacturing distribution technology media communications healthcare energy and utilities boards members were the largest single respondent that’s an important fact to keep in mind for when you when you view some of the results and the lens that you look at that through board members tend to look at strategic courage they tend to look at the macro the second biggest set of respondents with CFOs and COOs more inclined to look at operational risks and we get and we glean that’s knowledge and when we look at the commentary that comes with the respondents that came in it’s also a global survey we are a largely a UK audience today but it’s a global survey that you haven’t so some things may be skewed from that perspective I will show you a European perspective as well which not the one that you have in your cards but it is a global survey there is science behind this we did this in conjunction with a with a university in North Carolina as you respond to this you scored risks and that scoring goes into an engine that then generates the ranking of those risks there so it is a random it isn’t it isn’t we don’t make it up there is science behind this and that and actually give you confidence when you look at this and take some of these perspectives back so from a macro perspective overall you deemed that the risks and 2020 as you look out in 2020 we are less risky than 2019 that surprised some of us when we saw that actually you placed us somewhere between 2018 and 2019 when we did this last year 2019 was the riskiest year on record according to the survey but overall we’re on to that so why might that be when we dug into it a large part of that was due to optimism around the US market in particular and some of that some of the bullishness in that US markets and some of the outlet there was driving some of that sentiment the number one risk up here is the impact of regulatory change and scrutiny on operational resilience products and services that’s a big category that’s a lot of words and it’s not a surprise to us that when you responded to that you

picked that as number one that that captures a lot of things it was ranked third last year number one was the points around competing against born-digital firms that’s now slipped to number four but regulatory change linked to operational resilience is up there at number one from my perspective from my naive perspective looking at the financial services world that’s not a surprise we sat there anywhere in our office at the end of last year and saw a huge uptick in regulatory scrutiny of our clients the regulator writing to our clients and saying we’re going to come and look at you and what are we going to focus on we’re going to focus on how you managed IT change how resilient are you what are your cyber threats they’re all links they all come up there into that topic of resilience and that’s a large part of what we do a large part of where we work with our clients and we’re not we’re not surprised by that the number two risk because around economic conditions and how they impact growth that wasn’t in the survey last year or rather it wasn’t in the top 10 risks last year so that’s shot up there now again we found that surprising for those of you who saw Trump’s Davos speech the other day he effectively was saying the old Macmillan quota if you’ve never had this so good is he right or wrong? those markets are strong but we believe within Protiviti and looking at your respondents that that is driven by the impact of uncertainty particularly around Brexit but also the US-China trade war geopolitical tensions in the Middle East the European market weaknesses they all give cause for concern and always heavily on your respondent details so the commentaries that we saw there push that up to number two and then at number three succession challenges and the ability to attract and retain top talent this for us is where it gets interesting that was at number two last year but the fact it’s still up there is interesting for us because we see echoed time and time again throughout those questions if you look at point number four for example you’ll see that that top that theme about talent stretches across into that risk as well it is echoed in why you can’t compete in a digital world it’s echoed in point five and risk five around why people are resistant to change and it’s echoed in point eight around the culture to speak up around risk and in point ten around the adoption of digital technologies the point about talents and people having the right people in your organization is at number three but actually isn’t it is in almost 50 percent of those risks so people is a key risk for you risk number four the ability to compete in a born digital organization this is another key theme and again it’s not just there but that concepts of Technology and innovation you will then see echoes across a lot of those other points cyber resilience at the top one operational resilience is about a last part about technology resilience it’s there it’s in point six around cyber its in point seven about privacy and identity and access management and it’s also around the adoption of digital technologies so we see that you have these two interconnected themes you have the themes of culture and people and you have the theme of innovation and technology when we look at Europe then very similar but incomes a different risk at number 10 and you didn’t see this before in the world in the in the world view at number 10 incomes poorly prepared for reputation management why might that be there and not in the other one well again we dug into that particularly in the European market and particularly in the UK market and the UK was was the biggest respondent within Europe within that this is on the backdrop of the context of some high profile corporate failures in 2019 in Q3 corporate failures were up by 15% but also GDPR our drives a lot of that and the reputational damage that comes from getting that wrong you only need to look at the big fine for Airbus Marriott BA Google as well as Facebook data breaches to see how important GDPR our failures can be to the

reputation of a brand but my two themes remain constant I’m happy that these two themes capture the essence of what we have for technology and innovation and talent and culture but when we look to this as a team we were surprised overall some things felt as though it was missing what would anyone anyone share a perspective what do you what do you think might be missing come on since you’re active anyone the environment thank you Peter so we looked at this and we said well given the backdrop of what’s happening at the minute why do we not see environmental factors so strongly in our own survey Peter wasn’t happy about this for starters I said I’m going to pull apart our own survey a bit so I have to stick to a certain line but this but this we thought was worth talking about so why is it that not in there I looked at the World Economic Forum’s global risks for 2020 these are their top five risks climate action failure weapons of mass destruction biodiversity loss extreme weather water crisis they don’t really jump out of our own survey of the responses that you guys have given and it is a different audience the WEF they’re in their 15th year they’ve got us on that and they go to a different they date they go to a different group in particular they have global shapers community which a bunch of entrepreneurs and social leaders it’s probably more diverse but ultimately our survey goes to leaders executives so whether you’re a Greta or a Donald we think there are risks here that need managing as Hamish said the thoughtful appreciation of multi-faceted risks is at the heart of this but I’m still intrigued why and that’s why I would welcome perspectives as to there was an opportunity on the report for people to say about environmental risk but it wasn’t on there would anyone like to share a perspective yes absolutely thank you so the point there was about time horizon so maybe we’re looking at a shorter a shorter time horizon where the World Economic Forum is it’s maybe bolder looking at that broader time horizon absolutely agree I don’t have the answers by though I’m just interested in your perspectives any any other thoughts yeah I think that’s right I think I think cultures the last part to do with it I read something the other day about Swedish Airlines in Sweden there is a culture of flight shaming so a Swedish airline a crime but which one but it is its flights are 5% down on year-on-year and part of the reason for that is flight shaming about the environmental impact of taking flights to Stuart’s point that is around culture that is a cultural issue so if we had in this room a CEO of an airline company probably the environmental impact or the environmental risks would be up there on their agenda so my conclusions around that around the survey people are becoming critical in a digital world there’s actually a wonderful oxymoron it’s something that we’re all told isn’t the case I’m Hamish showed a very very good slide about showing the various jobs at risks from from the digital world but actually the responses you’ve given is saying people are absolutely critical it’s the right people that you need but if you get that right your future ready

a 360-degree understanding of your risks is also important because only by doing that can you understand how they’re connected and how you have that in interconnected web of risks and the last point is about being bolder part of the reason I’ll agree with the time horizon I agree with the culture point but part of this we think is about being bold and looking beyond your immediate horizon if we put ourselves back in 2005 or the early 2000s how many people would have thought for example digital would be a key risk for us now how many people could put their head above the parapet and look at what the next risk might be in 2025 that’s what I mean by that so it’s thinking broader it’s being bold it’s sticking your hand up it comes down to the speak up culture it comes down to just saying what really the risks are beyond your immediate front door beyond your company beyond your industry and what’s out there so at the heart of this we touched on the risks it’s really then moving on to the opportunity as Peter said at the start our strap line it’s about facing the future with confidence and that might only encapsulate risks but also getting confidence by how you harness the opportunities so I’ll take those themes one by one firstly people are becoming critical in a digital world to give you my perspective on that we work with a lot of clients to help them understand where they are from a digital perspective and what we find interesting is that that digital footprint that digital flipping that our clients have isn’t one that is well understood very often our clients may tell us we’re digitally advanced we do a lot of things digitally we’re fantastic from a digital perspective and certainly a lot of our clients are but sometimes we view that there’s a bit of a digital veneer a bit of digital window dressing I bank with a well-known High Street Bank they give me an app they say they just saw they give me a great app the app works all the time it’s pretty it’s pretty resilient it works really well I could do my banking I can scan cheques I can do I can do a lot of things but the other day I rang them up to open a bank account they’ve known me for 20 years and they said yep – open the savings can’t need to come to our branch I need to scan your passport just to check who you are you need to tell me your outgoings I said well you see that yeah yeah we need to go through them we need to tell me your salary so but again you see that yeah but this is the way it works I could go if I wish to a challenge a bank and open that in seconds so why why is there a difference there we could argue that part of that difference is because that Bank has embraced a digital footprint for some of what they do but they are not truly digital we believe that digital leaders to the far right of that scale or ones where digital is a mindset a mindset from the very start of what they do to the end it’s a culture it’s an attitude it impacts and it shapes the way they look at problems the way they interact with customers the way they interact with their own employees and that’s the difference that’s what drives people from the left of that scale up to the right and really that comes down to having the right people you will never achieve that unless you have people with that right mindset he will challenge that and will say it’s not just good enough to have an app that does that you actually need to embrace the full lifecycle of that of that customer’s journey through your bank so how do we address that with Protiviti how do we look at how do we work with our clients that well actually this is the result of a digital maturity assessment so this is a free tool that we have click on our website you find that it is a quite easy assessment tool that looks at certain categories within your business and you answer questions around them and that then gives you back your score from a digital perspective but also most importantly it compares you against your peers and so it begins that digital journey assessment for you it shows you

where you might have gaps where you might have issues importantly it isn’t just about technology it focuses in your vision your culture your organization and your technology but it’s the whole of that the second point then of my conclusion was around a 360 degree approach to risk management I spoke to one of my clients the other day and they and they kind of backed this up and they gave her this idea they said to me and this person runs a a large operational resilience function and he said to me the way I look at my risk is also almost like one of those almost like a DNA ball of interconnected streams he said so my challenge that I want to do is almost better pick that up and visualize it and I want to understand that even though I may have mapped a process from there to there and I could take a box the regulator’s I’ve mapped a process actually what I can’t map all the interconnectivity that I want to be able to visualize that and I want to turn that ball around and we’ll look at in different ways and look at it from different perspectives almost like a Rubik’s Cube of ways of looking at it we like that concept I think that’s at the heart of how risk needs to be looked at and that sort of some of what Hamish says it’s also less concepts before it’s about broadening those horizons but understanding how they are all linked so again one of the ways that we do this is to be work with our clients using a framework because our clients come to us and they say what does good look like am I risky what are my main risks am I riskier today than I was yesterday will I be riskier tomorrow and to do that you cannot look in one at one risk in isolation but you need to look at all the risks because their interconnected so this assessment here gives 360-degree visibility and why what’s the opportunity there well it consolidates the disparate parts of your risk management it should allow you a better understanding of your marketplace a better understanding of your competitors and it should show you where those opportunities are compared to them very often people value those peer comparisons and we think that’s great because by not being an outlier by understanding where you are can have comfort with regulators but also it helps you chart that path forward but here’s my final thought about risks not being able to be viewed in a silo Hamish spoke a lot about the economic cycle that is absolutely part of this but for me as well I focus on horizon scanning and actually this is about you so everything I’ve said here can be academic if ultimately you do nothing a lot of you here when you had a show of hands earlier so many of you of risk stewards this is in your gift to do this if you are bold and if you go back and if you challenge the status quo and if you put your hand up and say these are our risks today but what will our risks be in 2025 we believe that’s going in the right direction but ultimately do something because with that lovely quote there that’s more useful than doing nothing but actually I’ll go a step further than that if there’s one thing that the World Economic Forum Risk survey says and our risk survey says is that the risk of doing nothing is the greatest risk thank you very much [Applause] Thank you both Paul and Hamish for your very interesting presentations analysis insight I’m sure that that has raised lots of thoughts challenges questions in your minds it’s sometimes a little bit

difficult to get these things going but I’m going to try straight away and say would you like to pose some questions to to our presenters who’s first in line there’s one right at the back there please Craig Thornton a question for Hamish if I may you talked about potential rollback on globalization and on democracy but not so much about our model of relatively unfettered free market capitalism don’t you feel that the inequality that’s been created either does or should sound the death knell for that model in a shorter time scale perhaps than either globalisation or democracy? very good question thank you for thank you for asking me I’ve thought quite a lot about that it depends where you’re looking from if you’re looking from from here from the shard you see the triumph of the market system if you’re looking from where I spend quite a lot of my time in Scotland in the place called Dalbeattie on the Solway you’re really seeing none of the benefits I mean you’re really is tricky it’s it’s tough it’s a town that’s that’s struggling but we are looking from a mature developed world and we’re seeing the benefits and the difficulties of the mixed market systems it’s a mixed market system I don’t think anyone here in the most extreme elements of the market ignores they shouldn’t be a role for government so we’ve got to do something the government’s have to order and they have to control and they have to have to regulate but that’s it’s seeing a thing through a prism of our world if you’re looking at China they’ve taken depends a bit on how you do the sum’s six hundred million people out of poverty and into a middle-class lifestyle through application of the market system it’s not capitalism but it is the market system and Jack Ma is what number six in the world in terms of wealth if you look at what’s happening in Africa fastest-growing region of the world at the moment albeit from a low base again its market systems actually it helped a lot by technology which which are lifting that and of course the same in India so I think that that oh one final thing there’s a study by Brookings which looked at the proportion of the world there was middle class and they came up with the rather cute and slightly spurious calculation I think in September of 2018 that that moment in time half of the world was either middle class or richer and it has never happened before in human history so I think that that I’m reasonably confident that a mixed economy will have more support around the world even if there is in the Labour Party much for concern about its is bad function is bad functioning and much more concern if you’re working for some British charities about the fact that there are huge inequalities so I sort of feel look globally the market system has done pretty darn well if it lifted half the world to middle-class and the projections are two-thirds of the world of the middle class by 2050 I sort of feel comforted by that not the perfect answer it’s about the best I can manage thank you I’d like to debate it further but I would dominate I’ll come to the probably a question for Hamish and Paul you touched upon

social media digital my question is around potential risks from generation ed so generation “Z” you know age group up-to 20/21 they sort of live culturally in a completely different way you know the way they interact the way they socialize there’s way they share ideas and I mean as well as an opportunity but it’s also a big risk because you know I mean I’ve got two teenaged lads and I just see it and I’ve heard about at various presentations just wanted to get your thoughts on that because that could be a big risk to you know industry and commerce and the way why industry you know companies will need to think going forward into the future as this generations though it comes through Shall I give quick response and then Paul can probably more of an expert than I am I see this through the prism of writing and the plus being I can reach people worldwide the minus being you’re terribly worried that that they’re only reading on a narrow a narrow spectrum of views I I think that this is an initial response to a whole set of new technologies and I think it is very worrying that people only talk to themselves so to speak or to people who agree with them and if you do that you don’t see things coming and sitting in The Independent with a pretty lefty group of young people when I when I go in there they just did had no perception of what’s going to happen in the election they couldn’t they couldn’t understand it and they’re still founding very difficult the process and that’s just my own narrow perspective on that however I think that the fact that talking to some of people they are aware this is a problem and that’s the first thing of fixing it and that you do of course have access to the great world of opinion outside there and I think what will happen is these are new technologies heating the generation as people get older they will actually use those new technologies to broaden out but if you say to me what’s the evidence that they’re doing it’s it’s pretty sketchy at the moment No thank you that I’ve agreed with that I’ll take a I think a slightly different perspective on that before I do is anyone here from a challenger bank what the describe is a challenge about can you bank excellence I’m not going to offend anyone staight away one of my clients is a challenger bank and I was I was there the other day and for those of you who have who have who have been told kind of work with those institutions they absolutely want and they attract that generation X/Z and it’s an amazing place to be you go in there there’s people bring their dogs they kind of you know they walk around and the bare feet it’s all it’s all very different and right my conservative team of kind of auditors and risk managers are not comfortable there we’re not we know we’re trying to be cool but it’s just missing and but it’s interesting talking to them so I’m talking to the CEO he’s about half my age and he’s and he’s telling me about how how they go to market and all their team behind them that are that Generation X they’ve built it up from the from the very the start start with that team and it’s so exciting and they have simple architecture everyone understands it and they go forward but because they are so Generation X because they are so millennial they speak to that as a customer base when I say to my mum and dad would you ever consider banking with them my partents of all no I’ve never heard of it why would I go there I go to a high street bank and that’s the challenge almost they’re so defined by being that Generation X by by being so cool that but actually they limit their customer base so it’s taking a slightly different perspective although I see I see how it plays out wonderfully in being able to harness the power and the passion and the insight and everything that’s different about that generation and going back to what I was saying though I think to be to be a born digital firm or to become a almost a born again digital firm you need that Generation X you need those crazy ideas in the room but also then if you if you go that far how do you then speak to your wider market base because you can begin to alienate them just by having

that brand shift I don’t know if that answers your question yeah no I think so I mean I’ve worked financial services and banking and I have some experience I won’t name the Building Society or very old building society and they had an aging customer population and working there it was so behind a long history but it was so behind outta touch with the new generations “X/Z”” and it’s fighting right because they can’t get out of their history like your new new challenge opponents the startups they’re attuned in the way you described so yeah I mean I think that resonates but you know I’ve actually seen seen it for real and it’s quite you know and if these organizations don’t change and in the way you described in your graph earlier they could get left behind yeah yeah thank you incidentally from someone running a consulting company that is trying to be relevant to its clients in that space we of course recruit now particularly our graduate intake from exactly that population and we do it because yes we need we need to play to those strengths we need that degree of when we talk about diversity and inclusion a lot don’t we we talk about it from a from a gender perspective and from an ethnicity perspective etc we need to think about it from a generational perspective as well and we have to and it’s a bloody nightmare managing some of these people it’s a bloody nightmare getting them and training them and finding space that they like to work in even in The Shard but we have to do it and I think if we look at it from that perspective playing to strengths and drawing upon the strengths of those people and what they bring to our organization it so it’s a great bonus just there was just to build on that I think when you look at our company as a whole now attrition rates I believe around that generations “Z” it is the highest so for us one of our challenges is how we reinvent ourselves how we are the employer of choice to them so what do we need to look like as it digital leader to to attract those people to retain those people to get them excited about being the next generation of leadership I think that’s always on our agenda, there was a question here towards the front yeah good morning Ed Blakely Barclays Bank I was starting to wonder was the some concern when the topic of climate action pressure would be raiser Paul thank you very much for including that I’d be interested to hear from both of you what you think the opportunities in that regard are for the UK economy ? well we’re not doing too badly in the UK we are the largest offshore wind farm users in the world and we will become even more when the Dogger Bank thing comes on streams so in terms of the decarbonizing our economy we’re actually doing very well and that has been opportunities in all those technologies we also have a power supply infrastructure which I think will create more opportunities just to become more efficient but if you’re looking at how do you become more efficient there you can do an awful lot by applying good ordinary technology over the area and the great thing about that one of the problems of our countries we’re very uneven you know the best are wonderful and the bad is that there’s a long tail of mediocrity and I think that our opportunity is to get the best in terms of practice and it isn’t just energy use it’s all sorts of things more evenly through the land so I think in that space that’s a very general answer there are lots of opportunities if you say to me okay McRae give me an example of that I would have to say well wait am I need to talk to someone who is really good at improving energy use in the home and ask to see what Centrica are doing on that well they’re probably not big enough but but there will be opportunities in each individual segment to take the best and lift the average I agree with that I’ll make I’m making a kind of a controversial step further here but I going back to how I described

the digital world that I see the response to some of the environmental threats as being a little bit of window dressing a little bit of token you know we do this or we’ve got the number of flights we do whatever whatever that is right I think if if I would almost tell you that digital segments and and play it from an environmental perspective I think there is an opportunity for companies to develop their brand to show how environmental they are because why will that be appealing it will be appealing to the customer base the generations “Z” that you’re describing but also everyone else and but what does that mean that’s not just publishing a you know a green colored annual reports or operating so statements out there in the market it goes back to a mindset it goes back to a culture it goes back to a way of solving problems from that environmental perspective are we all going to get up and go to a conference in the US probably at the minute when that’s that’s the way we work we don’t really think that much about it but making statements about will actually we do this differently this is our environmental policy and actually impacts our day to day I think there’s a brand opportunity there I think in the next 10 15 years I think people will look at companies from a resilience perspective and they will say I want to go over to this client because I want to use this because it’s resilient it’s not going to fail I like it I have faith in it but I think that environmental one is is is heavily second as well we were shocked when we look to that Davos report and we looked in kind of some level of panic around how different those results were I could have showed a number of other perspectives showing how if you went back to 2008 it was all economic those top risks and then in 2008 were were all about the crash all about the crash from about 2013 onwards everything shifted to environmental and those kind of global systemic issues water crisis things like that so I think there’s an opportunity to evolve brands to really encapsulate those themes to be market-leading is I think that’s where the best people and something and customer bases will drift towards could I just add one word authentic and you know you’ve got to be authentic is much it’s worse to say we are wonderfully green at every and then actually screw up you know you’re bowing you know you gotta be authentic thank you very much just an observation from a comment that one of our CTO’s is made to me at a dinner a couple of months ago out of interest how many people have more than six television screens computers or laptops or other digital devices in their in their home at the moment pretty much everyone more than eight yeah more than 10 we used to have one television in our house 30/40 years ago there’s a connection isn’t it is there not between the amount of amounts of digital capacity and capability we’re producing and the amount of power that requires to support it I mean a clearly clear there’s a there’s a lot more efficiency now that’s incredible the the plethora of electronic devices we have we have around our homes these days um any more questions just as a question for further back that I think we’ve probably got time for one or two more questions and then we’ll wrap up probably bit of an observation rather than the question so you’ve showed three themes around the key being the people and talent and technology and climate and we’ve talked a lot in the questions about technology and the climate on the people side it was more about hiring Millennials the other thing that Hamish said was the UK one of the experts or something that UK just passed is education and education innovation is an opportunity I just wonder if UK has sort of missed that boat already because I and also if you do the same survey in the HR and another spaces whether that will come up the same because if you look at all the change you’re showing in the last 20 years it’s dramatic if you look at how people hiring and what people are doing not in work environment but actually high in and building talent and education it hasn’t changed certainly in the UK in the last 20 years but if you look in what’s happening in Asia China Singapore all the innovation in education actually miles ahead and just an observation I wonder what you think about that? very important observation thank you for it I mean what we’re doing okay on the Pisa report I mean we’re sort of middle-of-the-pack a bit not losing ground

maybe gaining a bit of ground terms of universities I really think we’re still right up there I mean you can slice it any way you like but I mean we’ve got either four or five of the top 20 universities in the world and two of the top two or three of them I mean you know I think it’s pretty good I mean I know a lot about Oxford never having never gone to I went to Dublin but my wife was head of an Oxford College and so I was the trailing spouse there and my god they’re annoying but they were so good they’re really really good you know this is the third best of University of the world whatever it’s really really good so I think that I think our problem goes back in this country and education to the unevenness the best wonderful but the average is not good enough and the worst are really not too good but I mean at least at least we are aware but this is important and I think that’s the first stage of that but thank you for raising and I wish we were doing better on the Pisa results and you know the Pisa proof it’s in French it it’s 16 year olds around the world survey done by the by the OECD’s real again it’s really really good stuff if you’re interested in that I agree I agree I think it’s as you look at our education system I have I have two daughters I have a son my daughters go through school they’re offered French and Spanish and German to learn which is great they love it my son’s offered Chinese and I think wow how wonderful those because actually if you take your graph there that is why are we not and obviously there’s there’s there’s probably a deficit of Chinese teachers but that that is such an important skill set to have in the next however long one observation that I would have on what you said I don’t think it’s just about hiring millennials I think it’s I don’t think we all need to pack up and go I think it’s I think it’s about embracing some of that mindset and and actually allowing them to speak and because by doing that I think we can learn a lot so it’s it’s it’s having that openness and that and that willingness to take of it yes they might be off the mark sometime but that can drive it for but I think it’s having that blend because sometimes it is experience that’s needed maybe there is no substitute for experience but it is blended I think with that outset and that and that’s where I think there is a competitive advantage if we if we change our mindsets in that way but I mean they’re very sweet to me on the Indy my job is to supply diversity you know I’m the only white elderly male thank you I think we’ve approached the witching hour it’s it’s just turned to 10 o’clock and I promised you that we would who would aim to finish by by 10 so I’m going to draw a close to the questions there if I may they will of course still be an opportunity to talk and network and and mingle with our with our presenters outside here so let’s please do that as well after now thank you once again both of you for your very insightful presentations from from my point of view this whole this whole thing I talked about the perfect storm all these drivers have changed risk and an opportunity at the outset it’s driving a lot of change in our business to the things you’re coming to us with now are are fundamentally different from from where they were even a couple of years ago we happen to be a consulting firm that’s that’s owned by staffing and recruitment firm so we’re a billion dollar consulting firm part of a seven billion dollar global of staffing and recruitment firm and and people used to come to as purely for consulting projects or people bodies staff augmentation and that’s changed dramatically what’s happening now is a much more agile set of demands from from from you based on I think a lot of what’s happening so sometimes you need people sometimes you need projects sometimes you need them short term sometimes you need them long term you want outcomes you want deliverables you want things changed and increasingly you’re actually saying to us as well can you just take the problem off my hands

and sort it please fix it run it for a while and then give it back to me fixed and that’s fundamentally different for us and I do believe it’s being driven by this dynamic world we operate in and and we believe we have a good opportunity to work together with you to provide that confidence in this dynamic world I know many of you are clients of ours already some of you may not be I look forward to many more of you being our clients in the future thank you for your participation today one last point there is a feedback card on your on your chairs it asks you please for some feedback on the content of today we like to change these events as I said we’ve done today and mix this up a bit to make them different and more exciting and interesting for you so we welcome that feedback we also ask you to say well there’s anything particularly that’s your burning issue that you’d like to talk to us about if there is please write it down and we will come back to you so please fill in your feedback forms after this please enjoy the networking and the refreshments outside I really appreciate your participation and thank you for everything thank you