The theme for this year’s annual meeting of the World Economic Forum was ‘Mastering the Fourth Industrial Revolution.’ This was rather brave, considering the backdrop of China’s economic slowdown, rock-bottom oil prices, the fear of an impending economic recession, and the growing threat of terror groups. The most critical word seems to be ‘mastering.’ For a business to sustain itself till the fourth industrial revolution, it needs to master the art of managing risks.
I would like to draw your attention to three key observations that arose at the WEF 2016 that Indian businesses need to take note of.
Just before the Davos meeting, Oxfam launched a report that highlights the alarming levels of economic inequality in the world. A recent IMF report states that income inequality impacts growth and its sustainability. The report also suggests that the poor and the middle class matter the most for growth.
The Global Risk Report launched by the World Economic Forum shows that ‘Profound Social Instability’ is one of the most interconnected risks for the world. The report also shows that the trend of rising income and wealth disparity is a key factor for profound social instability.
As part of the Global Risk Report, businesses worldwide ranked unemployment and underemployment as the top risk and profound social instability as the fifth-highest risk. This suggests that businesses worldwide acknowledge the inequality challenge. However, Indian businesses feel that profound social instability is the third-least important risk, while unemployment and underemployment rank 18th. This could mean two things – either Indian businesses feel they are better prepared to mitigate these risks as compared to their global counterparts, or they feel that the Indian economy is immune to these risks.
The Health Risk
Two sessions at Davos discussed the global health challenge and our preparedness to face the next epidemic. The world had barely recovered from the Ebola crisis when the Zika virus outbreak hit. These epidemics challenge the preparedness of health systems globally. The Ebola outbreak exposed the fragile health-care systems in Africa. In addition to the tragic loss of human lives, the Ebola epidemic knocked off an estimated $805 million from the GDP of the three most affected countries. Businesses having exposure in the Western Africa region (especially travel-related) faced business and market losses.
Surprisingly, businesses globally and in India do not think that the spread of infectious diseases is a major risk. This risk is associated with trends like climate change and urbanisation, which are evidently very high in economies like India. As per WHO data, infectious diseases (including HIV, TB and malaria) are among the highest causes of the disease burden in India. The probability of prosperity for Indian businesses is contingent to the well-being of its future workforce, consumers and suppliers.
The Gender Gap
There seems to be a fair consensus on the economic significance of plugging this gap, but with little action. As per the Global Gender Gap Report 2015, at current pace of change the world would close the economic gender gap by the year 2133. Of the 2,500 participants at Davos this year only 17.8 percent were women as reported in an article.
India ranks 108 of 145 countries on the Gender Gap Index. Its rank decreases to 139 in the economic category. Indian businesses have a lot of catching up to do to close the economic opportunity gap between men and women. A leading business newspaper in India recently hosted its annual corporate excellence awards and failed to find even one woman worthy of an award.
The fourth industrial era will be a different place and would need a different business paradigm. Speaking at Davos, Pierre Nanterme, CEO of Accenture said, “Digital is the main reason just over half of the companies on the Fortune 500 have disappeared since the year 2000.” The ability to convert risks into opportunities could perhaps define businesses of the new era.
A Photo from the awards captioned :’A-listers of India Inc’ conveniently crops out the women A-lister on the extreme left. Source Economic times