Tracking changes on risk, COVID, big quit, hybrid work, ESG, etc.

As business leaders aim to end a volatile year strong, here’s a look at how the forward-looking 2022 trend predictions from earlier this year continue in an environment of continued disruption:

1. Risk is here to stay. Tracked as expected. Risk remains a major part of business decision-making for the remainder of 2022 and beyond. The frequency and simultaneous occurrence of high impact risks such as climate, geopolitics, health, finance, economy, supply chain, talent shortage, human capital, cyber and war continue to increase throughout 2022 and require connecting and managing a “portfolio” of enterprise-level risks. These risks require a culture of adaptability to integrate new information arriving daily or hourly and require leaders to act decisively when events occur. The role of the Chief Risk Officer (CRO) continues to grow in importance within the board of directors and senior management. The CRO strives to create flexibility to deal with risk volatility to avoid downward spirals caused by cross-events (e.g. recent spike in concurrent illnesses, extreme weather, labor shortages implementation, supply chain disruption, reputational damage, funding shortage) that continue to challenge a cross section of industries throughout 2022.

2. Remote and hybrid work models will stabilize and normalize. Followed somewhat as expected. Throughout 2022, leaders have struggled to find balance in working patterns. They have restored and maintained in-person work arrangements where appropriate and offered remote and hybrid work models where they make sense. An ongoing challenge for 2022 is that employees want more remote and hybrid working arrangements than those offered by companies. Recent research shows that 58% of employees prefer hybrid or fully remote working arrangements, but only 41% of employers offer them. To complicate matters further, many employees, especially early career employees (56%), feel disconnected or isolated due to remote working. Leaders continue to analyze working arrangements and make decisions considering outcomes related to talent market access, productivity, engagement, turnover, culture, health, innovation and risk. They recognize that it could be years before the models reach a new equilibrium.

3. The “Great Resignation” will give way to permanent shortages of talent in certain fields. Tracked as expected (unfortunately). The July employment report from the U.S. Bureau of Labor Statistics (BLS) adds evidence that the big quit is not a short-term phenomenon, but rather an indication that talent shortages and high levels of turnover employee structure could last in the long term. The report shows that, despite recession fears, employment rose in July and the unemployment rate edged down to 3.5%, returning to pre-pandemic levels. The average hourly wage increased by 5.2% compared to last year. Quit rates in June remained unchanged at high levels (2.8%). Meanwhile, June’s consumer price index of 9.1% hit a 41-year high. Labor force participation, at 62.1%, remained little changed from the previous month, but below its pre-pandemic value of February 2020 (63.4%). More permanent demographic shifts have manifested in talent shortages for certain jobs, skill areas and geographies that could exist for years. Recent research continues to show that more than half of American employees are looking for new opportunities or are at risk of leaving their employer. Effective leaders continue to focus on talent strategies that balance offense and defense, and create places where people want to be no matter what.

4. ESG and sustainability will become mainstream. Followed as expected, with a twist. As ESG has continued to grow as a dominant business issue in 2022, it has also become a growing source of debate and backlash among parties with varying ideologies and interests, and business leaders report that their way of thinking about ESG has changed. ESG efforts are dynamic and reflect that leaders take action for different reasons. In some cases, companies are driven by regulatory and legislative changes, or stock market rules, as well as changing investor requirements. Others are driven by customer pressure and competition for employees. Some efforts are driven by values, purpose, or social responsibility, and others by business strategy. Research from MSCI and Sustainalytics suggests that over time, ESG-focused companies typically experience lower risk, higher earnings growth, higher active return and higher dividends than other companies . The ESG debate and evolution are expected to continue into 2022.

5. Employee well-being and organizational resilience will create competitive advantage. Tracked as expected. New research shows that organizations with structures and a culture that promote resilience and well-being are strongly linked to better employee outcomes than companies without these factors. Effective leaders promote employee well-being, connecting the support of healthy, resilient employees to healthy, resilient organizations. They also take a broad view of resilience by focusing on its financial, operational and workforce dimensions. They understand that research shows that 30% of American workers struggle financially, 43% struggle to meet their basic needs, and 62% feel burnt out from work. Effective leaders strive to meet the unique physical, emotional, financial, and social well-being needs of employees, create a shared sense of purpose, and foster physical and psychological safety because these efforts empower employees and organizations to thrive in the toughest conditions.

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