understanding opportunity and risk

minimising future risk       creating sustainable advantage       creating opportunity

A Series of Unfortunate Events ...                  April, 2011

The world is changing. The pace of change is increasing. The world as we know it, is highly interconnected and, crucially, interdependent. The world as we know it is a series of dynamic systems that impact one another. This is change. As a greater impact from a greater knowledge is created, so is produced greater change. It's a fact of life. This means an occurrence in one area will send out "ripples of consequence", creating change and the dynamic movement of society.

This is the world as we know it. A dynamic equilibrium kept in a moving balance through constant cause and effect. A wondrous myriad.

It is a serious mistake to believe any of us are isolated. It is a serious mistake for any business to think they do not have to pay attention to the wider changes taking place. It is a serious mistake for countries to act without planning and a proper view of how the world is developing.

Markets shift. Requirements change. Economies fluctuate. This is all part of the wider global changes rapidly taking place. No one lives in isolation. Because of this there is a defined business need to have visibility of the opportunities and threats fast approaching over the horizon.

What I'm about to say has been said a number of times on the Alt3 site. I am going to outline the changes taking place over the next few years. Why am I repeating myself? Because there is a need. Previous Alt3 forecasting articles have been to give visibility of what was likely to take place across the world. This article is to repeat the details - yet with clear indications the process of significant and fundamental change has begun.

What was forecast by Alt3 a few years ago to take place 3-5 years from that point ... is now in progress.

We are about to experience "a series of unfortunate events". Each event will be a trigger for the next, more severe effect, gradually building in consequence. This is termed "resonant change", where the resonance increases with each individual input ... until it breaks the system it is resonating through. These effects will be felt by every country, every business, every consumer. Make no mistake, however, this isn't an "end of the world" doom and gloom prediction. It isn't the end of the world by any means so forget all those ridiculous 2012 supernatural predictions. But we are entering a time of significant and fundamental change. This will mean a combination of opportunity and threat.

This is information companies need if their strategies are to be relevant - if they are to remain relevant in this turbulent 21st century. The last few years has seen the demise of giants who previously considered themselves invincible. History is littered with dinosaurs.

Points to note:

• increasing costs

• increasing competition

• social unrest / dissatisfaction

• decreasing food production in sensitive global regions

• increase in migration

• difficulties in maintaining law and order within the crush of activity of the mega-cities

• an ideological battlefield

1. The increasing price of oil.

Peak Oil: demand outstripping supply - the cost of oil will continue to increase. Due to the stranglehold of the oil companies and producers on the global economy, and the largely ineffective leadership in energy management from the majority of the developed world, the increasing cost of oil will be a critical factor in undermining economic growth.

Countries are and will continue to engage alternative sources of energy to fuel their growth and development. However, due to a lack of investment and political foresight the search for a general and genuine oil-alternative will be too little too late. As a result there will be economic growth - but not nearly as much as would be hoped, and with increasing stress from energy prices pushing up costs, adding to inflation and general unrest.

The effects of this should not be underestimated. It will produce a political minefield with fluctuating ideologically driven policies depending on the prevailing political power.

The long, slow general increase in costs will hit the industrial nations hardest, yet, ironically, it is these nations who have the greatest economic resilience - and critically who will continue to use oil at unsustainable levels. This will further fuel the undermining of economic progression. The poorer and the fast developing nations will also be hit by increasing fuel costs, but importantly, they will be hit more by the downturn in industrial and consumer demand from the developed world as costs overall increase.

Only those nations who undertake significant and coordinated investment in the development and implementation of new sources of energy will be in a position to achieve better than average rates of growth.

Increasing costs add to the risk of general industrial strike action and, in some regions of the world, social unrest and sustained calls for social and government change. The gap between the have's and the have-nots will increase, as will the ideological gap between those supporting either faction ... and actions between them.

As costs increase so does national and international tension - and the drive to mobilise the population.

2. Corporate efficiency.

Business is a major driving factor in the health of the global economy. Business effectiveness and profitability are key to producing a widespread wealth and increasing standards of living.

Corporate efficiency will be a major driving force in all business operations. Those that are successful will survive and prosper. Those that aren't will struggle as they continue to absorb high costs and lost opportunity within an increasingly competitive and dynamic commercial environment.

This will become a fact of business life because as the commercial competition intensifies, it will dawn on business leaders that the overall cost of sale is increasing - and they can achieve more through internal efficiency. Many organisations lose massive amounts of valuable funding through poor process, alignment and standardisation. For example, in 2010 a large multinational announced it had saved £2.3bn by going through a basic programme of efficiency.

Revenue generation will always be important - but what is the use of increasing revenue if there is falling profitability due to high internal costs?

Automation through information management will be key. It will mean smaller companies can achieve greater results without the burden of high numbers of staff.  This is the era of the fast beating the slow. This will sharply increase the competitiveness within the job market. It will also increase the mobility of people on a national and a global scale resulting in a greater "brain drain" from regions of low opportunity to regions of sustained opportunity.

Another great key for major corporations will be globalisation to take advantage of defined (but temporary) cost differences.

A fundamental part of the new corporate efficiency will be information management. There will be a move to capture more of an individuals end to end lifestyle within a series of services and products.

Another key area will be health provision. Currently many, many healthcare organisations are highly inefficient and extremely resistant to change. This leads to poor healthcare provision and massive differences in the availability of healthcare. In the new world developing there will only be one way to increase the scale and scope of healthcare development and delivery.

Generally, organisational efficiency will drive a greater consumerism - and will also drive a greater availability of workforce. And as the global population increases, as social mobility increases, if a workforce is not productive ... it is a cost to the national economies. This cost will increase as will the dissatisfaction of many.

3. Fresh water, changing weather and agricultural production.

As the global population continues to increase, as the amount of fresh water polluted increases, as the amount of fresh water used for agriculture and industry increases, the overall amount of fresh water per head of population will decrease. In some regions of the world this further slight difference will tip the balance between societies just clinging on and completely unsustainable societies.

Combine this with the types widespread pollution and of changing weather patterns we are starting to see - and already fragile systems will be strained beyond breaking point. There will be drought across large areas of the world, even although ironically there will also be widespread floods. The drought / flooding will significantly impact food production, making it impossible for many to feed themselves, making it even more expensive for others amid a backdrop of general increasing costs and social stress. The global system will start to creak from the strain.

In some drought stricken regions there will be hardship. In others there will be severe humanitarian disaster - likely too great and too widespread for any aid programme to aleviate. People will need to leave these lands or they will die. This will be the start of a knock-on wave of migration that will see the further rise of criminal organisations, hidden slavery and exploitation kept alive through corruption and drug smuggling.

Food will become more expensive. Salaries will not rise in line and in an increasing amount, will be non-existent. Once more this is a major factor that will undermine the most exposed economies. There will be social unrest which in some areas will turn violent. This will be a situation extremists will strive to take advantage of, adding to the sense of increasing chaos and lack of effective management.

Authority will struggle.

Arms sales will increase.

There will be conflict.

4. Migration.

From the above there will be at first a gradual shift from rural areas to cities. Within a short time this gradual shift will increase dramatically, virtually emptying the worst drought regions with people on the poorer scale of society streaming towards the nearest cities.

Many of these cities will become even more overwhelmed than they are at present. There will be significant hardship, the spread of disease, crime and extremism.

Quickly this will turn from a localised national movement of people into an international wave of migration. At the forefront of this wave of migration will be organised crime. Traffickers will become more sophisticated, as will the trail of corruption and association with other areas of organised crime, weapons and drugs. Borders will be porous. Where they are not porous they will have to be virtually fortified - a difficult task.

This will become a major area of difficulty for every region of the world, most especially the receiving regions such as Europe. The inability of Europe to manage its own affairs will mean Europe increasingly becoming an easy target for smugglers and those wishing to exploit the internal systems.

2011 figures: 7500 people per hour move from the land to the cities; 3000 people an hour move into city slums areas. This is expected to increase rapidly during 2012 onward - emptying the land in some regions and virtually bringing agricultural production to a halt. Among many consequences it will also mean a heavier burden on foreign aid.

Some countries will find it necessary to halt or reduce their commitment to giving aid. Rising costs at home and the high incidence of corruption in some countries will slowly but surely turn off the aid tap.

5. The rise of the mega-city, pressure on resources and cultural clash.

As transport increases, as migration massively increases, cities all across the world will be under severe and increasing pressure. The populations of cities will increase dramatically. In many instances this will be beyond the capabilities of the cities to accommodate the increases. This will mean a severe strain on local resources such as housing, education, health and the availability of opportunity.

Taxation will increase - creating even more tension and bitterness aimed at those who gain disproportionately. There will be a greater political uncertainty.

The consequences of the increases in population on the expected scale combined with the extra strains will undoubtedly include increases in crime, the establishment of effective "no-go" areas, a re-establishment of religious and political extremism, social and industrial unrest.

Within cities there will be increased surveillance by the security services.

All of the above will need to be tackled by long term strategy. Politically correct short term political point scoring will simply increase the instability and give greater momentum to "resonant change".

Within the above catagories there are a tremendous amount of detail outlining the opportunities and threats. It must be stated once more that those organisations who have visibility of the changes taking place will be in a far better position to capitalise upon the changes - to survive and flourish.

The world as we know it is about to "re-align" to a new equilibrium. A scary prospect or an adventurous opportunity? Answer if you dare.

Regards

JS

If you don't understand the risks, how can you prepare? Can you afford to let the issues be blurred?

The turbulent 21st century

life isn't black and white

central@alt3.co.uk