A lengthy list of potential risks keeps leaders up at night: Geo-political instability, vulnerable supply chains, rapid cost increases, regulatory changes, cyberattacks, AI—the list goes on. Yet, the way we traditionally think and talk about risk management misses what may be the biggest threat of all: today, most risks are interconnected.
Since operational and business impacts become magnified when events occur, effective leaders typically consider the gamut of risk typologies and create active programs to assess and address each in turn. These days, it is equally crucial to consider how they come together. No threat takes place in a vacuum. Risks not only can cascade, they often converge. And when that happens, they tend to compound and grow in threat to the business entity.
Take environmental risks, from wildfires to extreme heat, which are growing in frequency and severity. A recent World Resources Institute analysis of 320 adaptation investments across 12 countries found that every $1 invested in resilience generates more than $10 in benefits over ten years, with average returns of 27%. It’s wise to make investments that address both chronic and acute physical risks, yet progress is being hindered by economic risks such as inflation, material shortages, labor costs and shifts in global markets, which affect project timelines and budgets.
To help hedge this kind of uncertainty, both governmental and private sector organizations are increasingly focused on efficiency and asset optimization. Those strategies help address operational and infrastructural risks, such as aging assets and inefficient systems, and can help prevent everything from operational delays to potentially deadly situations like power outages, bridge and roadway collapse. Today, infrastructural risks are also deeply connected to cyber risks, from an insufficient digital strategy to system vulnerabilities that can grow as systems become more interconnected. Our people and cargo transportation modes in the United States—transit, rail, ports and airports—are especially vulnerable to cyber risk, physical risks and operational risks due to the complexity of these aging assets.
In turn, some cyber risks can be linked to social and geopolitical risks, including public sentiment. Public views can be influenced by people’s experience of environmental and economic risk, derailing projects, influencing the regulatory context and creating yet more vulnerabilities.
Consider the intersection of power and water. 79% of Americans are concerned about the aging infrastructure of the U.S. electric grid, and with good reason. To enhance grid reliability, the U.S. will need to scale up power generation and build up to 3x our current transmission capacity within just 20 years. Deficiencies in our grid system pose a massive risk to our economy and quality of life. Perhaps less appreciated is the ways that the electric grid also depends on water infrastructure.
We need water for hydroelectric power and for the large volumes of water for cooling thermal plants require. In droughts and extreme heat, water shortages and power surges can occur simultaneously, straining the grid just when we need power most. Conversely, a storm that knocks out power also can halt water pumping, purification and treatment.
Without water, critical services from hospitals and firehouses, among others, would be compromised or inaccessible. It’s one reason that we increasingly work with hospitals that want to be able to operate as an island, with independent power and water, for multiple days. Particularly in times of crisis, hospitals are essential hubs for their communities. Another challenge is that many in the community won’t be able to reach the hospital without resilient roads and bridges, effective stormwater management so transportation infrastructure isn’t flooded, and reliable public transportation.
In essence, when systems fail, cascading impacts can ripple across other systems, from energy to water to buildings to transportation and beyond. Yet, the reality is that much of the built environment was designed to meet yesterday’s standards. It isn’t necessarily ready for today’s risks, let alone tomorrow’s.
Integrated Solutions - Since risk is increasingly interconnected, our approach to mitigations and solutions must be, too. Leaders need to help their organizations shift from siloed thinking to systems-based planning. Infrastructure resilience cannot be the job of one agency or one sector. It requires collaboration across many stakeholders, disciplines, jurisdictions and time horizons.
Comprehensive Risk Management in Early Phase Planning - We can do more to embed integrated risk management into project planning. Whether we’re designing a transit corridor or a water treatment plant, it can help to model how different types of risk—such as climate, cyber or operational—can intersect. Tools like digital twins can simulate cascading impacts before they occur. That’s critical for robust, forward-looking plans that are not only designed to meet today’s challenges but ready for variety of potential future scenarios.
Adaptive Capacity - Whether in the planning phase or part of an asset optimization process, we also can invest in adaptive capacity. For example, more modular construction can help address shortages in skills and labor. Nature-based solutions such as living breakwaters can heal themselves and expand organically as seawaters rise. As we build flexibility into systems, such as redundant power systems, we also can design to foster greater interdependence. A microgrid that powers only one building may be less useful than one that supports an entire neighborhood.
Collaboration - To mainstream these strategies, we also need to break down institutional silos, both within and between organizations and whole sectors of society. Within companies, risk management cannot be left to the enterprise risk management team alone. Experts from functions ranging from HR to sustainability and IT to facilities all have a role to play. Within government, agencies responsible for energy, transportation, water and emergency response can benefit from aligning their data platforms and their planning, investment and communications strategies.
The bottom line is that we need to become more agile. We need to ensure our systems, organizations and infrastructure are integrated, collaborative and adaptive. How? Start with an actionable plan, including clear, streamlined decision-making. If you don’t have a plan or haven’t updated yours recently, that is an opportunity for action. Share this article. Bring key stakeholders together and ask them for ideas. Foster the organizational capacity and propensity to work at the intersection of issues.
Perhaps most importantly, help those around you realize that the greatest risk of all might be our approach to risk itself. Today’s connectivity of risk demands connected, future ready solutions.
Joe Sczurko, President of WSP in the U.S., brings more than 35 of leadership experience and a deep understanding of the industry to meet evolving client needs. He has a proven track record of building, leading and fostering collaboration in diverse multi-sector and multi-service businesses across consulting and engineering services.
