Risk resilience

Resilience is the new buzzword. Ever since Hurricane Sandy assaulted one of the world’s top financial capitals, it seems to have been dawning on the global elite that business-as-usual is no longer a viable option. New strategies that can afford a nimbler response to catastrophe must be found.

And so the R-word was adopted by the World Economic Forum at Davos as its central theme this year. The catchword was “resilient dynamism” and building “risk resilience” was its goal. 

What did resilience mean to the corporate, political and NGO leaders who paid $40,000 per head to palaver with their peers and hopefully come up with some strategies that can stick? Karl Schwab, founder and executive chairman of the World Economic Forum, defined it:

“The system should be strategic, not crisis-driven. Most of our energy is currently absorbed by reactive rather than proactive measures. Managing crises instead of thinking about the future leads to defensive attitudes. We must adapt to a changing world, not defend outdated models.”

Sustainability And Stability Named As Chief Goals

Concerns centered on two broad goals: sustainability, or how to assure economic growth without overshooting limits, and financial stability, or ending the bubble-bust vicious cycle. 

Both are tall orders. The imperative of growth may not be even achievable in a world of finite resources, at least not under the current single-bottom line model that still rules global capitalism. And ending the bubble-bust economy has gotten, if anything, more difficult since the financial crisis of 2007, with financial institutions ever bigger and finance ever more opaque, while moral hazard shrinks down like Alice in the rabbit hole.

Financial Stability

Schwab’s warning to stop defending outdated models is right on the mark – but change comes hard to any elite. When Wall Street titans like Jamie Dimon and Lloyd Blankfein are rubbing shoulders with heads of state at Davos, the winds of change tend to moderate to light breezes – or dip into the doldrums.

Financial stability depends on transparency and accountability, which have yet to make their appearance on financial markets. Instead, what rules is what Bill Black, author of The Best Way to Rob a Bank is to Own One calls “systemically dangerous institutions (SDIs)” that create “criminogenic environments for Accounting Control Fraud” and he takes the WEF to task for ignoring them.

In 2010, the WEF annual meeting had a panel discussion on the issue of financial risk, but financial leaders at the 2013 WEF found themselves having to issue a warning that the world economy was still unstable, the Euro crisis endures, and mass unemployment on the continent will continue for the foreseeable future.

Next: Debt, Austerity and Unemployment