McKinsey on Risk & Resilience

McKinsey on Risk & ResilienceResilience for sustainable, inclusive growthNumber 14, June 2023 The articles in McKinsey on Risk & Resilience are written by risk experts and practitioners from McKinsey’s Risk & Resilience Practice and other firm practices. This publication offers readers insights into value-creating strategies and the translation of those strategies into company performance.This issue is available online at McKinsey.com. Comments and requests for copies or for permissions to republish an article can be sent via email to McKinsey_Risk@McKinsey.com.Cover image: © AlSimonov/Getty ImagesEditorial Board: Venky Anant, Jason Atkins, Bob Bartels, Oliver Bevan, Richard Bucci, Joseba Eceiza, Mihir Mysore, Luca Pancaldi, Thomas Poppensieker, Kayvaun Rowshankish, Sebastian Schneider, John Walsh, David Weidner, Olivia WhiteExternal Relations, Global Risk & Resilience Practice: Bob BartelsEditor: Richard Bucci, David WeidnerContributing editors: Rama Ramaswami, David SchwartzArt Direction and Design: Leff CommunicationsData Visualization: Richard Johnson, Matt Perry, Jonathon Rivait, Jessica WangManaging Editor: Heather ByerEditorial Production: Mark Cajigao, Nancy Cohn, Roger Draper, Ramya D'Rozario, Gwyn Herbein, Drew Holzfeind, LaShon Malone, Pamela Norton, Kanika Punwani, Charmaine Rice, Diane Rice, Dana Sand, Regina Small, Sarah Thuerk, Sneha Vats, Pooja Yadav McKinsey Global PublicationsPublisher: Raju NarisettiGlobal Editorial Director and Deputy Publisher:Lucia RahillyGlobal Publishing Boardof Editors: Roberta Fusaro, Bill Javetski, Mark Staples, Rick Tetzeli, Monica TorielloCopyright © 2023 McKinsey & Company. All rights reserved.This publication is not intended to be used as the basis for tradingin the shares of any company or for undertaking any other complexor significant financial transaction without consulting appropriate professional advisers.No part of this publication maybe copied or redistributed in anyform without the prior written consent of McKinsey & Company. ContentsResilience for sustainable, inclusive growthAddressing climate risk and sustainabilityThe resilience agenda for sustainable, inclusive growth The first comprehensive action agenda for sustainable, inclusive growth was presented at the 2023 annual meeting of the World Economic Forum. Managing financed emissions: How banks can support the net-zero transitionBanks finance carbon-emitting businesses, and they finance decarbonization of the economy as well. How effectively they address financed emissions can make all the difference.Survival through purpose: How Ukrainian businesses endured amid extreme uncertaintyUkrainian businesses that have survived and thrived in the face of an unforeseen Russian invasion offer lessons in resilience.Business building: The path to resilience in uncertain timesIn an uncertain economy, executives’ first instinct might be to cut costs and shore up established holdings. A better way is to build new businesses.A devilish duality: How CEOs can square resilience with net-zero promisesAmid turbulence on the path to net zero, leaders will have to be much nimbler to balance resilience with an energy future that is secure, affordable, and clean. Five actions can help. Addressing the revolving door in riskAs the field of risk management evolves, the value proposition for employees has to evolve as well.53912491929 2Contents (continued)Managing risk in uncertaintyThe evolution of risk organizationsA technology survival guide for resilienceResilience means understanding the criticality of a business process, the capability of the underlying technology, the business impact if the technology fails, and the organization’s risk tolerance.Risk and resilience priorities, as told by chief risk officersAmid the storm of crises and disruptions, leading financial institutions are recognizing risk’s strategic and resilience-building role.Navigating economic uncertainty: New guidance for credit risk managementAmid persistent complexity, bank leadership teams need to urgently revisit their approaches to credit risk management.Response and resilience in operational-risk eventsDirect losses from operational-risk failures are mounting, and in today’s volatile economic environment, consequent losses in share price are many times greater.The next frontier in risk efficiencyAs global risks increase and economic uncertainty persists, the risk functions within the financial services industry must continue to evolve talent to ensure organizational resiliency.Rate reset presents banks with IRRBB challengeBy focusing on six key areas, banks can more accurately manage rising interest rates and credit spread risk across business lines, meet regulatory demands, and create competitive advantage.578866947380 Today’s uncertainty and disruption of business and society is challenging leaders in unforeseen ways.The liquidity scare in banking and accompanying interest rate sensitivity is just the latest in a series o