Relentless uncertainty: Why risk management must evolve

Uncertainty isn’t a passing storm — it’s the reality we now live in

Canada’s risk landscape has completely transformed over the past few decades. In response, it demands a shift in how organizations approach risk management. From a shaky economy, tariffs, and geopolitical tensions to cyberthreats and climate disasters, the challenges Canadian businesses are now facing are not only relentless, but ruthless.

Enterprise Risk Management (ERM) gained traction in the early 2000s as businesses integrated digital technologies into operations and corporate scandals seemed to be hitting the headlines regularly. The 2010s saw an explosion of interconnected systems that muddied the risk landscape and ushered in the need for a more dynamic approach: think smartphones, Internet of Things (IoT), and cloud computing.

And along came the 2020s

The 2020s brought seismic shifts. The COVID-19 pandemic forced organizations to accelerate digital transformations, manage supply chain disruptions, and manage a remote workforce. Again, risk became more complex and, suddenly, uncertainty was the rule, not the exception.

The forces impacting risk management continue to shift and expand. Artificial intelligence (AI) is reshaping how business is done in nearly every industry. Amid generational shifts in inflation, trade disruptions, and shifts in global markets, it seems more and more like the pandemic-driven economic instability was just the opening salvo.

Climate change is driving natural disasters at an increased rate with Canada experiencing its 10 worst disasters on record in the last decade, according to the Insurance Bureau of Canada. These events have resulted in $30 billion in cumulative insured losses in the last 10 years (up from the previous decade’s annual average of $2.2 billion).

Meanwhile, social and economic pressures are intensifying. A 2024 report from Food Banks Canada found that one in four Canadians now lives below the poverty line, which is more than double the official estimate from Statistics Canada. The housing crisis, driven by population growth and increasing rent prices, is adding even more pressure.

At the same time, businesses are facing a growing wave of cyber security threats, with 65 percent of Canadian business leaders saying cyber risks are a top concern, according to Travelers Canada Risk Index. Nearly one in three organizations have already experienced a cyber- attack. Medium-sized businesses have found themselves particularly vulnerable compared to their smaller counterparts.

Scenario planning has become essential

Clearly, there are troubled waters ahead. But they are still navigable, provided your organization commits to abandoning reactive approaches in favour of continuous scenario planning and agile risk management. This agility becomes especially important as we experience the compounding effects of risk — like tariffs challenging the economic viability of a company at the same time that a cyber-attack takes down their systems. The ability to anticipate, adapt, and respond to rapid change in an integrated manner is no longer only a competitive advantage — it’s how your business will survive. Thinking through the “what ifs” to anticipate how risk scenarios could play out will allow companies to become nimbler in responding to risks.

Escalating risks your company needs to watch for

Economic downturn: Concerns about a potential recession persist, with factors such as U.S.-imposed tariffs, trade disruption, and global economic uncertainties contribute to a cautious business environment.

Labour shortages: An aging workforce and shifting employee expectations make talent recruitment and retention a challenge.

Cyber security threats: The increasing frequency and sophistication of equire robust cyber security measures to protect sensitive data and maintain business continuity.

Inflation: The long-term impacts of inflation continue to impact both operational costs, consumer purchasing power, and global competitiveness.

Supply chain disruptions: Ongoing global supply chain challenges, made worse by factors like U.S. imposed tariffs, geopolitical tensions, and climate change pose risks to inventory management and production timelines.

Regulatory changes: New rules around factors like ESG, AI, trade conflicts, and data security could demand adaptation to new and more stringent standards.

Geopolitical uncertainty: Global political developments disrupt markets and impact business operations.

Technological disruption: Tech advancements need continuous adaptation to stay competitive in a digital economy.

Environmental risks: Businesses need to implement sustainable practices and prepare for potential regulatory and market shifts.

Reputational risks: Maintaining a positive corporate reputation is essential, as mishaps could potentially lead to significant financial and operational consequences.