Conducting risk assessments can help you prepare for adverse situations that may affect your program. A well-designed assessment will cover your internal environment (financial, marketing, operational, strategic and workforce risks) as well as external business environments (the changing economy, new market competitors and natural disasters). While contingent workforce program managers tend to focus more on co-employment/misclassification issues when assessing risk, it is important not to ignore external political and economic factors, especially as all the evidence suggests that the world is becoming a much riskier place.
The Brink of a Breakdown
Staffing Industry Analysts’ recent “Staffing Trends in 2018” report cited the Global Risks Report published by the World Economic Forum, which asked experts and decision-makers across the world to identify and analyze the most pressing risks facing the world. While the WEF report acknowledged that we were seeing encouraging global growth, it also highlighted the fact that the world has moved into a new and unsettling geopolitical phase where multilateral rules-based approaches have been fraying and picks out the five most likely risks as:
- extreme weather events;
- natural disasters;
- data fraud or theft; and
- failure of climate change mitigation and adaptation.
“This generation enjoys unprecedented technological, scientific and financial resources, which we should use to chart a course towards a more sustainable, equitable and inclusive future,” The World Economic Forum report states. “And yet this is perhaps the first generation to take the world to the brink of a systems breakdown.”
It is notable that environmental factors feature as three of the most likely risks, being ranked higher than average for both likelihood and impact over a 10-year horizon. Perhaps that is not so surprising, though. given this follows a year characterized by high-impact hurricanes, extreme temperatures and the first rise in CO2 emissions for four years.
Risk is a key reason why organizations use contingent labor. If the business and external environment was entirely predictable and didn’t change from month to month, there would be no need to hire any contingent labor at all. So, program managers need to pay close attention to risk in all its various guises to understand its likely impact on their business and workforce planning. However, what makes any external risk assessment more difficult is that uncertainty is also increasing.
The Economic Policy Uncertainty initiative tracks global risk by quantifying newspaper coverage of policy-related economic uncertainty, reflecting upon the number of federal tax code provisions set to expire in future years and measuring the scale of disagreement among economic forecasters as a proxy for uncertainty. Since 1987, uncertainty has been volatile, but this volatility has escalated since the middle of 2007 as the global economy started to deteriorate. A peak in uncertainty was reached in 2016 as US elections loomed, the UK voted to exit the European Union; and politics in Brazil, China and France became rather more volatile.
Internal risks are much easier to calculate and plan for while external risks are more likely to come as a shock to your business. As such, it would be foolish to be complacent. The global economy is growing nicely and, if we escape 2018 without an economic downturn, it will be the ninth successive year without a recession and thus equalling the post-war record set between 1992-2000. Yet, danger signals are still there. Brexit uncertainty is hampering the UK economy, the threat of a US-China trade war cannot be ruled out, inflation has been creeping up in a number of countries and public debt is stuck at worrying levels within many developed economies.
Risk is an important module within SIA’s Certified Contingent Workforce Professional accreditation, helping program managers to better identify and manage risks, especially as they may affect a contingent workforce program.