“The Greek economy is dominated by medium-sized family businesses. This corporate structure makes the business less receptive to developing a culture of risk management. However, the largest Greek organizations are now thinking more systematically in the field of risk management. This is expected to gradually move to smaller players and help shift the economy towards a more rigorous culture of risk management.” explains Matteo Coppola, referring to “K”., Managing Director and Senior Partner of the Boston Consulting Group (BCG). Coppola was in Athens this week as part of the BCG Global Conference on Risk and Compliance. The top manager of BCG notes that the next big problems for business are related to changing of the climate but also increasingly frequent unforeseen events. At the same time, he considers the risk of a new, universal, international to be limited. banking crisis and talks about a well-controlled European financial system, while explaining how technology and artificial intelligence can help quickly identify future risks.

– In the last 15 years, much attention has been paid by regulators to controlling mainly financial risks. But recent events in the US have shown that these risks for some parts of the financial industry are completely out of control, especially for smaller banks. The situation is clearly better in Europe, which is much better equipped after the challenges of the previous decade. Recently, more and more attention has been paid to new emerging “event” risks such as cyberspace, geopolitical events, supply chain and climate.

Managing them requires building robust sustainable approaches where a combination of human processes and robust automated controls must ensure rapid detection, protection and recovery. It is also important to consider the medium and long term evolution of these risks. We know that we will have a global problem of climate risks, but its consequences are not fully known. Scenario analysis is key here.

– The Greek economy is dominated by medium-sized family businesses. This corporate structure makes firms less receptive to developing a culture of risk management, also given a lower level of control compared to public companies. However, the largest Greek organizations are now thinking more systematically about risk management. This is expected to gradually move to smaller players and help shift the economy towards a more rigorous culture of risk management.

– Yes, the Greek business has some peculiarities. Historically, financial institutions have focused on credit risk management and bad loans. This was considered a priority, and banks can now turn their attention to new risks. ESG (Environmental, Social and Governance) is expected to stimulate the economy for decades to come as banks must manage climate risks while recognizing their central role in Greece’s respective path. Cyberspace will also become a priority, as in other EU countries, given its importance to the day-to-day operations of banks and the risk to reputation.

Risks based on random and largely unpredictable events will become more common.

In the energy sector, almost 50% of energy supply depends on oil, and 35% comes from power plants running on natural gas. Both are imported. This creates a high dependency on third parties, but also provides a double opportunity to accelerate the transition to cleaner energy sources, making Greece the energy hub of Europe, an entry point for energy from diversified sources.

– The fundamental point is to ensure that the risk management process is integrated into the management of the organization, supporting decision-making. A comprehensive risk management strategy begins with the identification of risks, including those that go beyond the traditional ones. Companies should then begin to quantify and measure risk, and develop a framework for targeted responses and activation of appropriate risk mitigation measures.

– Climate stress tests have so far been exploratory in nature. The reality is that these are not true stress tests to allocate funds to cover adverse scenarios, but rather ways to measure the potential impact of long-term climate scenarios. We are still in the early stages as the methodologies are not yet mature and the data is not always available. This will become the norm as the climate is probably the biggest danger in the world. Banks will also suffer.

Given the nature of this risk, the lack of prior knowledge of the impacts of climate risks, and the uncertainty of future developments and impacts, structured scenario analysis, which we call “stress testing,” will become an even more structured and important prudential tool.

“They showed that risks based on random and largely unpredictable events will become more common. Companies in any industry need to be able to deal with them, but with limited ability to “predict” and “measure” in advance, and more so with the need to be able to “feel” and “react” quickly. COVID and the recent crisis in Ukraine have significantly affected all industries, with risks that have not been seen in Europe for many years or varying intensity, such as inflation, commodity prices and supply chain disruptions. Risks increasingly arise directly from the complexity of networks between customers, vendors, people and systems.

It becomes increasingly difficult to understand the potential for disruption if any of these elements in a company’s ecosystem suddenly change or disappear. Therefore, companies should invest in risk management capabilities. The key to staying ahead of change is to see it early, and technology, including artificial intelligence, can help with that.

Additional protection for depositors

– We can be optimistic that there will be no crisis of such magnitude as in 2008. In Europe, very strong oversight by the ECB and the Bank of England over the past 15 years has created, at least in terms of risk, a reasonably sound financial system. In the US, where we have seen several (several) cases of mismanagement among regional and mid-sized banks, the emphasis will again be on strengthening risk management practices. A review of the deposit protection system could also be initiated in several markets, including Europe, to further protect depositors at regional and smaller banks.