James E. Blair, President
 March 2025

Dear Colleague:    
The Move Toward Hard Stuff! 

The 2025 World Economic Forum held in Davos, Switzerland produced global discussion and agreement that we are headed into a hard set of risks that directly impact human life and historic ways of living (please see the attachment).  Startling from past Forums, the top risk forecast for 2025 is State Based Armed Conflict.  The third year of the Ukrainian/Russian war, along with other armed conflicts in Israel/Gaza, Israel/Lebanon, the Sudan, and Syria, all reflect the human tendency to fall into physical fighting.  The risk profile generally is bleak, and the impacts of a regional conflict permeate throughout the globe.  No domestic business can take action to directly mitigate the impact of war elsewhere.  The challenge is preparedness to respond and adapt to changed operations caused from a faraway conflict.  

The second major change this year is the harsh and costly impacts of extreme weather events.  Billions in direct physical losses, lost human life and property, and then the business disruption and economic losses are approaching a trillion dollars into 2025.  In the US alone, hurricane Helene in the south, wildfires in the west, heavy freezing and snow in the northeast have caused extraordinary losses of which only 40% will be covered by insurance and the balance by business and the public.  The new administration has harshly threatened reduced financial assistance to the impacted states and communities.  Thousands of businesses are in jeopardy in the year 2025.  Domestic business can anticipate and prepare for weather related damage, but the frequency and magnitude of the events in the last 6 months are beyond comprehension.    

Other top 10 global impact risks include economic stress domestically and cross-border, societal polarization, misinformation/disinformation, use of economic weapons to threaten countries, local communities and states, misuse of the public forum for messaging by politicians, and general confusion to distract business and policy makers who are dedicated to progress and business success.  The last set of risks focus on humans, including political polarization, forced migration, erosion of human rights, change in earth systems, and lastly cyber-espionage and warfare.  Interestingly cyber has slipped from #1 to #10, only because the intensity of risks posed by other factors has skyrocketed.  Proactive leadership of people, processes, supply chains and operational excellence is the most likely strategy to drive success.  Human impact needs are in need of risk-oriented attention.      

The World Economic Executive Opinion Survey generally mirrored the findings of the Forum.  Exceptions included the risk of Inflation and increased public debt.  Executives are also concerned about loss of biodiversity and chronic health conditions.  The debate over vaccines and treatments is worth tuning into and your business may risk absence beyond the norm in the next year or two.  Mitigation could include education, offering sponsored inoculations, health consultation and of course the medical benefits offered to employees.  The public debates about reliable medical expertise will certainly concern the working members on your teams that can distract the workforce.  Leadership matters!       

Page 2

Cyber Threats Continue

Ransomware celebrates its 35th year of existence this year and has caused more than $1 billion in costs and losses.  In 2024, 193 million records were compromised at a cost of $813 million.  The year showed a 312% increase in data breach notices to consumers totaling 1.7 billion notices sent.  Distributed Denial of Service (DDOS) attacks were up 82% over 2023, generally fueled by artificial intelligence and advancements in DDOS-as-a-service available for rent (at about $2,500 a pop).  

Cyber-attacks on industrial operations systems spiked 87% 2024/23 raising havoc on manufacturers, logistics firms, utilities, hospitals, educational institutions, and financial firms.  The bad guys have advanced their attack systems to now land on a victim and bore into the core of their computer systems; and rather than a one-and-done approach they now remain in the systems and cause repeat hacks over time.  Clients are encouraged to concentrate recovery strategies toward Resilience that can provide protection on a longer horizon.  

The largest risks are the result of third-party dependencies.  Any connection to a supplier, service provider, partner, or customer provides hackers readily available ports of entry.  Remember 12 years ago when an HVAC company opened the back door to Target and brought their systems down impacting 70 million customers and costing more than $400 million.  As much effort as clients have put into cyber-protection, the hacking community has run faster and remains in the lead.  Artificial Intelligence now enables the hackers to move more creatively than ever before.  CrowdStrike reported that hackers have achieved new record speed in moving laterally through networks in 2024, down to 48 minutes.  Talk with your IT Managed Services Provider about how they are deploying AI to counter the threats in the cyber-verse.  Amazingly, the majority of business continues to operate without Multi-Factor Authentication (MFA) – It is the tool to use!  

Private Security Market to Reach $531.5 billion

Attacks on corporate leaders and highly visible/wealthy citizens are resulting in extraordinary growth in this business segment.  Growth of 8% CAGR during the next 10 years is forecast.  In the second quarterly Client Advisory we will address these patterns in greater depth.  Questions, please call us.   

These are part of the Risk Management principles foundational to the work of Integrated Risk Management Solutions, LLC.  We help you prepare and deliver trusted and responsive products/services, and people.  I look forward to your thoughts and questions – please contact us. 

Manage Your Risks Well,
 
Attachment	
Risk Management is Every Team Member’s Business

Managing Risk = Cash Flow
Typical returns are 4:1 ROI and significant cash flow improvement!

Risk is anything that impacts cash flow!  Successful companies manage risk more effectively than competitors.  By practicing a “Risk Awareness” culture that engages every level of the business in prevention-centric behavior, cash flow is improved.
Key Risk Management Facts:
•	Companies spend between 7 - 10% of revenue on risk-related costs, including:
   - Safety 		- Security			- Information Security      - Health & Wellness
   - Absence*	- Theft			- Fraud Prevention	 		- Revenue Inefficiency 
   - Audit 		- Compliance 	- Investigations 	    	 		- Settlements 
   - Claims 		- Insurance 		- Crisis Management 	 	- Emergency Response
       * Incidental absence can increase the costs of employee health and wellness programs by 2X.

•	Risk costs are in multiple silos hiding the “Total Cost of Risk” and measurable ROI.
•	80% of company information system risks come from employees and trusted vendors.  
•	FM Global, a world-wide property insurance and engineering firm, estimates that company earnings volatility can be reduced by 50% through effective Risk Management prevention and preparedness programs.  
•	Companies that manage risks effectively will receive the best insurance prices and maximize the option to self-insure.  
•	Enterprise-wide Risk Management is a complete vision of company risk.  A strong Risk Management culture helps a company respond more nimbly to unforeseeable events. 
•	Documented and tested Business Interruption/Scenario Plans sustain key operations during an emergency and improve company survival by 70%.
•	Uncertainty and financial pressure renew the need to manage risk.  These pressures have always been present, but the magnitude and visibility are at an all-time high.    
•	Third party vendor transactions often result in 10% or greater errors and inaccurate billing.
•	Sarbanes-Oxley, Dodd-Frank and compliance audits only test transactional controls – operational controls are “the source” of risk – Operations Assurance is the key!  
•	Regular Operations Assurance reviews can improve revenue efficiency by up to 20%.
•	Synergy from a holistic focus on risk, cost/revenue efficiency, loss reduction, underperforming vendors and fraud produces impactful cash flow improvement.

2025 Global Risks Defined by:

World Economic Forum 
•	State Based Armed Conflict
•	Extreme Weather Events
•	Geoeconomic Confrontation 
•	Misinformation-Disinformation
•	Societal Polarization 
•	Economic Downturn 
•	Critical Change in Earth Systems
•	Involuntary Migration
•	Erosion of Human Rights 
•	Cyber Espionage/Warfare

      
 Global Executive Opinion
•	Economic Downturn
•	Inflation/Public Debt
•	Extreme Weather Events
•	Biodiversity Loss
•	Armed Conflict 
•	Geoeconomic Confrontation
•	Societal Polarization
•	Chronic Health Conditions
•	Involuntary Migration 
•	Cyber Insecurity 

Manage Your Risks Well!
January 2025