By Jean Devlin, Partner, Control Risks

Shortly after the release of the 2024 Edelman Trust Barometer, which revealed “a rift between innovation and society”, Resilience First convened a roundtable discussion on ‘Bridging the gap between regulation and the exponential pace of private sector innovation’. The animating question was about how public and private entities can collaborate in a timely way, in order to ensure a safe, secure and resilient world.

Resilience in the face of the Great Realignment: competition and localisation

Opening with a view from Control Risks’ RiskMap forecast for 2024, there was a sense of the historic moment in which we find ourselves. A landmark year for democracy with record numbers voting in elections, 2024 will be a year of historic significance and uncertainty. At Control Risks we refer to this period as ‘the great realignment’, and believe it is driven by the two megatrends of geopolitical competition and localisation, which are shaping how companies and countries reorient and realign in a fast-evolving world. Although there is rightly much focus on US-China relations as the key engine of this geopolitical competition, the world will not split into two neat halves in a re-enactment of the Cold War order. Instead this year we are likely to see more evidence of the emerging influence of Middle Powers to counter-balance great power rivalry, and claim their place in the re-wiring of the global economic and political system (spanning trade, supply chains, energy markets, and global institutions). In this world, many governments are nationalist, short-term, and sometimes populist too. Across the board, we are seeing countries localise as a way of protecting national and strategic interests, including requiring businesses to operate differently across markets, as well as investments very focused case-by-case assessments.

How big is the gap?

Since 2021 we have highlighted the gap between governments, especially Western governments’, ability to keep pace with technological change and the increased velocity of strategic risks emerging, meaning that more falls to businesses to decide and to manage. This is reinforced by the latest Edelman report, as well as by business surveys which underline external threats, including cyber threats, as the most significant affecting business [1]. It has become particularly evident in how generative artificial intelligence is being developed, with regulators yet to agree on the principles to uphold with regards to how the technology is or isn’t used globally. This is a stark illustration of the public sector struggling to keep up with the pace of change, and the public clearly questioning its ability to catch up.

If the goal of regulation is to support problems being resolved in ways that most benefit people and the planet, it must set appropriate incentives and measurements that keep private sector activities focused on these outcomes. Beyond the headline-grabbing topic of generative AI and the incredible advances made in that sphere over the past 15 months, there are live questions for resilience in the UK now relating to the cost of living, the quality and availability healthcare as the population ages, and the management of extreme weather events and their impacts, especially on the most vulnerable parts of the country and segments of society.

Key debates

The Resilience First discussion generated lively debate ranging from the need for more strategic policy making to position for the upsides of technological innovation, to suggestions on new institutions to enable better long-term decision making around spreading the costs of resilience. Other perspectives shared included:

  • With trust in public institutions in the UK eroding[2], the design of regulatory bodies needs to reinforce trust in their ability to take impactful decisions that move the needle towards a more resilient society;
  • How can the financial costs of investing in resilience be balanced and shared now and into the future across different stakeholders: government, communities, private sector companies and local authorities, and the wider population?
  • Policymakers and political leaders must have clear assumptions on the behaviours they are looking to encourage and discourage, both from individuals (citizens and consumers) and businesses so that costs can be fairly shared;
  • A recognition of the difficulty in making a political case for investment in resilience across parliamentary terms that makes clear the benefits to all of society – and possible solutions such as revamped roles for expert bodies and regulators including an Office of National Resilience (similar to the Office of Budgetary Responsibility);
  • The role of the private sector must be to challenge and inform the intelligent design of regulation;
  • For private sector companies themselves, greater moves towards scenario forecasting and testing are underpinning organisational resilience while enabling innovation to continue;
  • Overall agreement that the role of the public sector, and of political leadership, is critical in creating a safe and resilient environment and society.

Opportunity through turbulence

At present it is difficult to square the circle between spending on major resilience challenges, such as long-term adaptation to climate change, the technology which is driving innovation, and existing economic activity which is struggling with productivity and growth. The new digital economy requires energy, which comes with carbon emissions, and the supply chains feeding into the economy extend across different geopolitical blocs and areas of the world that are more or less secure and stable. Yet through the pressure that these challenges bring, there is also the opportunity to harness what is going well, and the unique points of competitive advantage through clear roles for the public and private sector. The ‘whole-of-society’ approach to resilience set out in the Resilience Statement is a positive move in squaring this circle.

[1] For example see Control Risks’ Global Resilience Report 2023.

[2] For example, the Edelman Trust Barometer Global Report found that almost two-thirds of respondents in the UK agreed with the statement that government regulators lack adequate understanding of emerging technologies to regulate them effectively.