Risk Management v4.0! - how the Fourth Industrial Revolution is expected to shape the future Risk Management Discipline - RIMS Australasia
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Risk Management v4.0!
…how the Fourth Industrial Revolution is expected to
Risk 4.0! – Warren Black 2019
shape the future Risk Management Discipline
Warren Black
September 2019
Understanding the
Risk 4.0! – Warren Black 2019
evolution of our
Working World
Setting the Scene
The telephone (1876) took almost 70 years to attract 100 million users,
whereas Facebook (2004) achieved that many users in five years
and Candy Crush (2012) in only three
Risk 4.0! – Warren Black 2019
Soon we should expect to see start‐up
organisations emerge that can attract a
100 million customers in less than a year
and a billion customers within three
This means a modern organisationʹs
biggest competitor a year from now,
could be one that doesn’t even yet exist
Welcome to the Fourth Industrial Revolution… are you prepared?
The Four Evolutions of our Working World
1st Revolution
Steam 2nd Revolution
Electricity 3rd Revolution
Computer 4th Technology
Revolution
(Late 1700’s) (Early 1900’s) (Late 1900’s) (2016 >)
Risk 4.0! – Warren Black 2019
Mechanisation, Accessible power, Personal computers, Cyber systems, Smart
factories, steam lighting, motors, programming, data, technologies, big data,
plants, steam ships, refrigeration, automation, electronics, advanced analytics,
steam trains, early assembly lines, internet, e‐commerce, artificial intelligence,
globalisation mass production Email, MS Windows autonomous machines
During each Revolution, the accepted thinking & working methods of the day changed so
radically that they now represent a measurable growth spurt in human evolution
So What?
The world is at a cross roads…
The future combination of big data,
smart technologies and integrated
Risk 4.0! – Warren Black 2019
cyber systems is going to transform
our existence at every level, creating
opportunities (and threats) that were
once unimaginable
- Klaus Schwab (2019)
Founder and Chairman of the
World Economic Forum
The Three Revolutionary
Risk 4.0! – Warren Black 2019
Fronts of the Fourth
Industrial Revolution
Revolutionary Front #1 – The combination of
Big Data and Advanced Analytics
Expected advances in data gathering
devices, intelligent analytics, quantum
computing and information sharing
Risk 4.0! – Warren Black 2019
networks mean that we are rapidly
transforming into a “Digital Earth”
Consider an absolute global network
of interconnected Smart Cities, Smart
Homes, Smart Offices, Smart Machines,
Smart Devices and the like - all
gathering, sharing and responding to
real time data as a collective
SMART - Self Monitoring, Analyzing &
Responding Technologies
Revolutionary Front #2 – The combination of
Artificial Intelligence and Advanced Robotics
Expected advances in Smart
technologies, android mechanics,
composite materials and nano-
Risk 4.0! – Warren Black 2019
technologies will ensure that
autonomous machines get
smarter, smaller, lighter and quieter
We should in turn experience
colossal leaps in the contributing
role of intelligent, autonomous
machines within our future society
Revolutionary Front #3 – The integration of
Humans and Technology
Expected advances in biotechnologies,
neurotechnologies, organic cloning,
robotics and 3D printing means that it is
Risk 4.0! – Warren Black 2019
only a matter of time before we see the
first Cyborg Humans with enhanced
physical & analytical capabilities
In turn, humans now risk becoming so
dependant on technology that our
species becomes vulnerable to the
absence of technology
Industry 4.0 timelines – how quickly & how radically?
2020 2025 2050
• >25 Billion Smart devices • >70 Billion Smart devices • Digital Earth Status - fully
• >500 Billion data • >One trillion data digitised cities, industries
gathering sensors gathering sensors infrastructure & services
• >2.5 Quintillion (1018) • >5 x 1018 bytes of data • Mass scale societal
bytes of daily user data generated per day dependence on
Risk 4.0! – Warren Black 2019
technology
• Extensive trials of • Societal acceptance • Fully autonomous
intelligent, autonomous of fully autonomous industries, labour, security
machines machines & services - 50% of existing
jobs may no longer exist
• Societal acceptance of • Extensive human trials • Societal acceptance of
implants, artificial limbs, of bionic limbs, neural Cyber enhanced humans
cloning, cosmetic surgery enhancers and cloned (Cyborgs)
and gender reassignment organs • First 150 year old humanWhat will a future
Risk Management v4.0
Risk 4.0! – Warren Black 2019
need to offer?As yet, it is not entirely clear where Industry 4.0
will lead the Risk Management Profession…
Risk 4.0! – Warren Black 2019
… there are however a few
obvious risk control areas that
modern organisations should
start planning for nowObvious Control Area #1
Cyber (enhanced) Risk Management
Cyber should revolutionise every aspect
of the risk management value chain
Rich, real-time data supported by
Risk 4.0! – Warren Black 2019
sophisticated analytics and complex
information sharing networks has an
unlimited potential to advance how
we visualise, document, assess, treat,
monitor and report risks
Expected cyber improvements include…Obvious Control Area #2
Complex Systems Thinking
The fact is our working world is not
getting any simpler, only more and
more systemically complex
Considering how Industry 4.0 will be
Risk 4.0! – Warren Black 2019
enabled by an unlimited number of
complex-integrated cyber systems it
is hard to picture a version of Risk 4.0
whereby complexity management
& systems thinking are not a core
capability requirementObvious Control Area #3
Natural (Systemic) Resilience
Resilience is the ability to respond
intelligently to environmental changes
In a working world experiencing ever
increasing volumes & frequencies of
Risk 4.0! – Warren Black 2019
disruptive changes; modern
organisations will need to build in a
natural immunity to rapidly emerging
technologies, competitor advances,
customer shifts, market shocks, disasters
and even deliberate attacksObvious Control Area #4
Protecting Shifting Value Drivers
Risk management has historically focused almost exclusively on protecting
such conventional value drivers as people, property, tools & products
During Industry 4.0, risk management
Risk 4.0! – Warren Black 2019
will need to do better at protecting new,
emerging asset classes such as;
Digital assets, operational data, client
details, intellectual property, patents,
contracts, licenses, prototypes, prints,
audio files, graphics, videos, electronic
signatures, service agreements,
contracts and so onHow the risk management
community might prepare
Risk 4.0! – Warren Black 2019
for Industry 4.0
(aka future proofing our profession)?How ripe for disruption is the
Risk Management profession?
In each of the three previous
industrial revolutions, it was the most
Risk 4.0! – Warren Black 2019
repetitive and standardised of tasks
that were disrupted by new
generation technologies
This observation has tremendous
ramifications for the risk
management profession as much of
what we currently consider to be
risk management better practice is
highly standardised and repeatableThe World Economic Forum,
Global Risk Report for 2019
Despite the increased intensity of the global risk landscape in
recent years, comparatively few participating organisations
have invested in the risk management infrastructure necessary
Risk 4.0! – Warren Black 2019
to respond positively to emerging global threats
As a result, many organisations now exist in a state of
self-induced vulnerability whereby they are potentially
“sleepwalking into crisis”Future Proofing Activity #1
Develop a valid Risk Transformation Plan!
Structured Risk Transformation Plan
Summit (2050)
Camp 4 (2040)
Risk 4.0! – Warren Black 2019
Camp 3 (2035)
Camp 2 (2030)
Camp 1 (2025)
Base Camp (2020)
Nobody arrives at the Base Camp of Mount Everest unprepared. Every climber first undergoes a
tremendous mental and physical transformation. Those who don’t commit to such a necessary
transformation, either get ejected or die on the MountainFuture Proofing Activity #2
Secure an academically valid view of your organisation’s future Risks
World Economic Forum, Global Risk Report 2019 Development of a Risk Framework for Industry 4.0
1. Failure of modern organisations to prepare for - Birkel, Veile et al., University of Salzburg (2019)
a prolonged period of rapidly emerging
1. Reduced profitability exposures and risk of false investments – keeping
industry changes and disruptive forces
up with the shifting technologies & customer needs of Industry 4.0 will
2. The more dependent humans become on require mass investment & restructuring. Increased capital spend on
technology the more vulnerable humankind new-unproven business enablers, will almost certainly create
becomes to the absence of technology profitability exposures & investment risks
Risk 4.0! – Warren Black 2019
3. Existing jobs, methods and skills may become 2. Industry Power Shifts & the Disruption of Established Models – the rapid
obsolete quicker than the employed emergence of new technologies, market entrants and business needs
workforce can be upskilled
will inevitably lead to increased competition, strategic mergers,
4. Modern technologies have not been equally acquisitions, liquidations and other forms of natural selection
distributed - future advancements may
emerge so rapidly that existing wealth, 3. Obsolescence & Redundancy – Internal resistance or a general failure
competency & literacy gaps become to prepare for emerging industry changes, may result in intellectual
cemented obsolescence, operational redundancy and/or a lack of market
competitiveness
5. New technologies are being designed
primarily for advancing human comfort, rather 4. Shock loss of a Critical Business Dependency – shifting market
than future proofing/saving our planet circumstances combined with rapidly emerging industry forces, may
result in the disruption of a critical partner, client or service provider
Learn more at www.complexus.com.au 5. Mass Skill & Expertise Volatility – rapidly evolving skill requirements,
combined with a rapid rise in the use of autonomous machinery may
result in a redundant, depleted, unprepared or under skilled workforceFuture Proofing Activity #3
Regularly test your organisation’s “Risk Readiness”
1. Does our risk management capability fully embrace the advantages of the
modern Cyber Culture - are we keeping up with new methods & thinking?
2. Does our risk management capability retain sufficient knowledge, capability
Risk 4.0! – Warren Black 2019
and validity to control the disruptive phenomena associated with increased
complexity - are we trained in the science of managing complexity?
3. Does our existing risk management efforts enable an organisation-wide Sense
of Resilience – i.e. increased intelligence, awareness, cohesion & agility?
4. Are our risk management efforts protecting our most valid value drivers,
threats & opportunities – do we genuinely know what they are?
5. Do we have an active transformation plan in play to upskill and recapitalize
our risk management capability over the next 5 years (at least)?Remember, Shift Happens!
Risk 4.0! – Warren Black 2019
Leading Brands Best Practices InnovationsClose Risk 4.0! – Warren Black 2019
Key Learnings from today
1. The future combination of big data, smart technologies and
complex cyber systems is going to revolutionise our existing
world in ways we can not yet fully comprehend
2. What we currently accept as leading practice or business-as-
Risk 4.0! – Warren Black 2019
usual will almost certainly be redefined during Industry 4.0
3. The known future of Risk Management lies in Complex Systems
Thinking, Resilience Theory and Cyber Enhanced methods
4. Modern organisations need to start visualising, planning &
upskilling for a Risk Management Version 4.0 if they are to survive
the transition to a future Industry 4.0Welcome to the world of
C
Complexus C C
Risk 4.0! – Warren Black 2019
C
C
Intelligent Risk Thinking
Learn more at
www.complexus.com.auWarren Black
Founder & Principal of Complexus
www.complexus.com.au
Warren is an Engineer, Risk Professional and Complex
Systems’ Thinker who has particular interest in
understanding how the complexity sciences might offer a
better means to controlling emergent risks within highly
Risk 4.0! – Warren Black 2019
complex, operating environments.
Warren consults to industry on how to improve
Governance, Risk & Assurance practices so that they may
reflect not only the degree of investment at risk, but also
the specific complexities in play.
Warren is currently engaged in a higher degree in research (PHD) program,
whereby he is Investigating a Complex Systems Approach To Organisation-wide Risk
Management, at the Queensland University of Technology.
27Understanding Evolution, Disruption & Obsolescence
Live Music > Recorded Music > Mobile > Digital > Streaming
10,000+ years 80 years 30 years 5 years
Bards > Minstrel Phonograph > Grammophone Walkman > Discman > Blue Tooth
Bands > Orchestras > RecordPlayer > HiFi Digital Player > Ipod > > Live
Smartphone Streaming
Risk 4.0! – Warren Black 2019
Steam Age Electrical Age Analog Age Digital Age Cyber Age
>1880 1900 1925 1950 1975 2000 2019
Most of what we accept as leading practice or business-as-usual today will
almost certainly become outdated or obsolete during Industry 4.0You can also read
