Embracing volatility

Author: Menso Kwint, Insurety

Is volatility good or bad? I don’t know for sure. I do, however, believe that it is with us to stay, and that it absolutely brings the opportunity for innovation and positive change in ourselves and our businesses.

Through 2018 and 2019 our business organised a series of internally focused talks by a futurist called Graham Codrington. He ran us through the ideas of change being exponential and the Fourth Industrial Revolution (the trend towards automation and data exchange in technologies and processes). He spoke about a shift in global energy use; the Internet of Things (things that are embedded with tech for the purpose of connecting and exchanging data with other devices and systems over the internet – e.g., smart watches), work-from-home, and augmented reality technologies (a technology that combines virtual information with the real world – e.g., Google Glass). Pretty high-flying stuff, but basically that the world is changing quicker, and that change is going to be impacting us more and more.

If volatility is the amount of uncertainty or risk related to the size of potential change, then the last few years speak for themselves in terms of personal and professional volatility. The first quarter of 2023 has already seen two multibillion dollar default events in the shape of Americanas and Silicon Valley Bank. In our South African trade credit business, we are currently seeing overdue notifications tick up markedly and maybe what’s most surprising is that we’re not surprised by it!

My thinking behind this article was not to talk about surviving volatility, but that it should not necessarily be seen as a bad thing. If volatility is perennial, how does one embrace it and look for opportunity through it? How does one thrive in the world we find ourselves. Basically, repeating Gandalf’s words to Frodo in the Lord of the Rings, when in response to Frodo complaining that he wished not to be living in difficult times, Gandalf replied: “All we have to decide is what to do with the time that is given us.”

Our products in credit and surety specifically mitigate credit and performance risk. Which through volatility, become even more important instruments. Volatility helps validate or confirm the need for what we do in the industries in which we operate. However, it is not just risk that has ramped up exponentially. The means through which that risk can be understood and mitigated have also improved drastically. Here are a few things we – in our organisation – have found beneficial:

Data gathering tools seem to have improved to the point where the technology is no longer a limitation. The challenges now seem to be more about how information is gathered ethically and securely, with protections in place for personal privacy.

Efficiencies improved by automation, decision tools and RPA (Robotic Process Automation) are astounding. In the past these technologies seemed complex and out of reach – to me at least.

Analytics and reporting have been exponentially enhanced by AI (Artificial Intelligence) – this is not a ChatGPT complied document, in case you wondered…

Work-from-home benefits have meant flexible working environments are more the norm and bring further time efficiencies.

The development of skills to be multi-disciplinary and cross functional mean people can hopefully react quicker and more positively to a changing environment. Understanding the importance of resilience in a tough climate.

To conclude, thank you to for the nomination I received to write this article and for the platform to say a few words. To my mind the volatility we see around us is hard on people and businesses without a doubt. However, it is also a driving opportunity to get to our clients, show value, bridge risk, and build sustainability though our products and people and with the better means at our disposal.

Each author of the Insider Column nominates the next writer.

In the Summer edition of the Insider Magazine, Sascha Dear from R+V Re accepted his nomination as a columnist.

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