Reading Summary: The FERMA NEXT Report on Emerging Risks

Source: FERMA Website Module: 2, Lesson 1

1. Core Thesis: The Foresight Gap

The central argument of the FERMA NEXT (New EXposure Trends) Report, developed by FERMA's Foresight Committee, is that a dangerous gap exists between the accelerating pace of emerging risks and the ability of organizations to manage them. The report, developed by a committee of professional risk managers, argues that short-term thinking, cognitive biases, and systemic barriers are preventing businesses from moving beyond a reactive, crisis-management approach to a proactive, foresight-driven one. The core problem is not that we can't see these risks coming, but that we fail to act on them until it's too late.

2. Key Findings for Strategists

The report identifies four critical categories of medium-to-long-term emerging risks that have the potential to severely disrupt European businesses:

Geopolitical Shifts: The report highlights the move from a stable, globalized world to one characterized by increasing instability, trade friction, and supply chain uncertainty. This is no longer a background concern but a primary operational risk.
Technological Acceleration: While acknowledging the opportunities, the report focuses on the risks of rapid technological change, including the potential for AI and automation to increase unemployment, create new ethical dilemmas, and reduce Europe's overall competitiveness if not managed strategically.
Human Capital: The challenge of finding, retaining, and upskilling talent in an era of rapid change is identified as a major systemic risk. The mismatch between available skills and future needs can cripple a company's ability to adapt.
Climate Change: Consistently highlighted as a top-tier risk, the report notes that the focus is often too narrow (on physical risks and insurance) and fails to account for the broader, systemic impacts on economies and societies.

The Barriers to Effective Foresight

More important than the list of risks is the report's analysis of why companies are so bad at addressing them. The key barriers include:

Cognitive Biases: A tendency to focus on immediate, familiar threats rather than abstract, long-term ones.
Market Pressures: The relentless demand for short-term quarterly gains often overrides the need for long-term resilience investments.
Regulatory Constraints: Rules and regulations that are often backward-looking and not designed for the complexity of emerging systemic risks.

3. Actionable Insights for Our Projects

This report is the perfect companion piece for your "Future Scenarios Brief" project:

Source of Critical Uncertainties: The four risk categories identified in this report are excellent starting points for your own analysis. You can choose two of these (e.g., Technological Acceleration and Geopolitical Shifts) as the axes for your scenario planning, directly informing the "Critical Uncertainties" section of your brief and helping you map your "Cone of Plausibility."
Adds Credibility to Your Brief: Referencing a professional report from an organization like FERMA will add significant weight and credibility to your own analysis. It shows you are grounding your foresight in the work of industry experts.
Reinforces the "Why": The report provides a powerful answer to why foresight is a critical business discipline. It frames the act of scenario planning not as an academic exercise, but as an essential tool for survival in a volatile world, helping you justify the importance of exploring the "Plausible Futures" within the Cone of Plausibility.

5. Key Questions for Reflection

How might the cognitive biases identified in the report manifest in your own organization's strategic planning?
Given the four critical emerging risks, which one do you believe poses the greatest threat to your industry, and why?
How can organizations move from a reactive "crisis management" approach to a proactive "foresight-driven" approach, as advocated by FERMA?

4. Conclusion

The FERMA NEXT Report is a call to action. It is a diagnosis of our collective failure to prepare for the future and a plea to embed foresight into the core of our strategic processes. For the purposes of this course, it serves as a real-world validation of the principles we are learning, demonstrating that the ability to think systematically about the future is one of the most valuable and sought-after skills in modern business.