Cynthia Munemo, Head of Risk Advisory at BDO Guernsey
One of the most striking realisations from living through the pandemic was that life was irrevocably changed.
In hindsight, it’s clear that change has always been a constant, but recent global disruptions have been particularly unpredictable. From COVID-19 to the wars in Ukraine and Gaza, rising tensions between China and Taiwan, the climate crisis, soaring inflation, and increasing interest rates, turbulence defines the geopolitical landscape. In addition, there is Artificial Intelligence (AI), which holds the unique position of being both a threat and an opportunity. Amid an unending era of crises, our team is cultivating ‘anti-fragility’, investigating its synergy with AI, and creating anti-fragile strategies in an AI-centric world.
Despite being miles away from international conflicts, local businesses inevitably feel their impact. The 2024 BDO Global Risk Landscape report noted that 60% of C-suite leaders acknowledge that risk velocity is increasing, making it harder for businesses to keep up. The report highlighted a significant change in the ranking of risks that business leaders feel unprepared for, demonstrating the rapid shifts in risk priorities amid ongoing disruptions.
A changing landscape: the rise of risk velocity
Risk professionals are exhausted from moving from one tumultuous event to another, and I can only imagine how many playbooks have been rewritten in the past three years. Clearly, there is a need to rethink our approach to risk management. Should we continue with the old style of managing risk, avoiding it altogether, reducing it to a tolerable level, or accepting it and hoping for the best? Or should we be more ‘risk welcoming’ by challenging the old ways and seeing risk as an opportunity? We at BDO Guernsey favour the latter.
As disruptions are neither predictable nor sequential, we no longer have the luxury of time to regroup and reflect after a crisis. This is why our advisory team is shifting towards an anti-fragile mindset. We use anti-fragile rather than resilient as the term suggests a business prepared for any eventuality, ensuring it is ready to handle challenges rather than being able to endure them. Key to this is foresight and pre-planning. Where previously, processes to mitigate risks may have been implemented with the benefit of hindsight, thinking ahead and being proactive is becoming essential.
Embracing AI: navigating the anti-fragility landscape
As businesses grapple with supply chain disruptions from ongoing geopolitical tensions, AI has rocked the proverbial boat, shaking things up and raising questions about its long-term benefits. Adopting an anti-fragile approach with AI can help business leaders uncover new avenues for value and growth. The BDO Global Risk Landscape report revealed a 30% decline in business leaders’ optimism about AI as an opportunity. Equally, a 2023 report on social media trends found that while 94% of leaders felt confident integrating AI into workflows, 98% recognised the need for a deeper understanding of its long-term potential.
With an anti-fragile mindset, our approach towards AI is to be a fast follower, making great efforts to remain cognisant of the latest developments in this emerging space. In the ongoing quest for full organisational resilience, embracing new technologies is paramount. Here are three observations we have made regarding the intersection of AI with anti-fragility, turning it not into a threat, but a powerful ally:
- Learning from disorder: Anti-fragile companies thrive on volatility and errors. Just as stressors carry information, AI systems can learn from disruption and adapt. They turn chaos into growth by integrating disparate data sources into decision-making.
- Dynamic adaptability: Static processes hinder learning. Antifragility requires dynamic, adaptive capabilities. AI, with its ability to evolve based on feedback, aligns perfectly with this principle.
- Beyond agility: Agility alone is not enough. Anti-fragile organisations actively seek randomness and disorder, and AI helps harness volatility, turning it into a strategic advantage.
Anti-fragility in internal audit: from enforcers to trusted advisors
As part of the move towards anti-fragility, we have witnessed the transformation of the internal audit function, shifting from an organisation’s ‘designated police officer’ to its ‘trusted advisor’. Internal auditors have historically been met with groans and sighs and are often seen as nitpickers (a sentiment my children would wholeheartedly agree with, when it comes to the internal auditor in our house). Yet, as the role of internal audit has evolved, so has our approach. At BDO Guernsey, we align closely with this proactive shift, leveraging insight and hindsight to provide forward-thinking recommendations.
Thinking ahead has revealed the true value of audit: its capacity to support businesses in going beyond resilience and striving towards becoming anti-fragile. We work together with management to identify root causes and provide clear recommendations (rather than an unhelpful list of shortcomings). The action plans we develop go beyond simply resisting the impact of crises; they futureproof the business against them before they occur.
Anti-fragile businesses that can weather any storm can and have been built. Our skilled advisory team has developed a well-oiled process that is flexible and scalable to each client’s unique needs. Moreover, we challenge our clients to think beyond their current practices and question existing assumptions. Are the processes and resources they use still effective or is it time to rethink their approach? Whatever the answer, we are ready to take them on the journey towards anti-fragility.
We do not have a crystal ball to predict the future, but BDO Guernsey can help ensure that our clients are ready for it. Want to talk about your advisory needs? Get in touch at: advisory@bdo.gg.
