A new risk management strategy has emerged in the last few years on risk management in global economy; burying heads in the sand or pretending that the risks don’t exist. This is rather a different response than accepting risk; you clearly see the risk, but neither accept nor manage, just ignore it! Extremely dangerous.

The belief behind it is: we’ll survive it somehow! Indeed, there were so many companies that somehow survived form the 2001 and 2008 crises, during the Covid period, and throughout the uncertain 2022. On the top of the survivor list was the national economies besides companies!

Together we survived by constantly and collectively pulling rabbits out of the hat.

However, people who base their decisions on models and data believe that this is not a wise risk management approach. While inflation structurally rises in America and Europe, many economies are about to fall into the grip of major economic problems. The mismatch between inflation-exchange rates-interest rates destabilizes the balance all over the world. Global supply chains do not tend to improve. Besides, geopolitical and domestic political risks are extremely high everywhere.

In fact, this is the worst time in history for the heads to be buried in the sand.

If you are following the strategy of burying your head into the sand by believing that some forces of nature or some global politics will keep the economy and demand alive, unfortunately, you may have to manage your crises rather than your risks in the very near future.

I hope you are competent in crisis management, because as I always say, those who cannot manage their risk will have to manage their crisis at the end!

I think this time it looks like there is no rabbit left in the hat. Most importantly, for the first time, the conjuncture of loose monetary policy becomes tighter and tighter and will not support economies further.

Therefore, companies around the globe urgently need to establish very effective risk management structures, active risk committees and risk management processes. Instead of executing technical workshops on process risks with process owners, it is necessary to focus directly on strategic and high-level decision risks originating from the macro environment and to manage these risks with realistic action plans.

Every company needs to prepare a strategic risk management plan before the summer ends. Independent members are required to keep their Boards of Directors alert on macro risks and its effects on their companies.

Better and wiser not to be late on this. You may not be able to manage your future with your head buried in the sand.