Risk is everywhere
Hyper-disruption demands constant reinvention
February 2, 2024
Today, mega shocks keep emerging and disruption and volatility are constant. Disruptive weather events, geopolitical upheaval and economic uncertainty are the new normal. Risk professionals are under growing pressure and scrutiny, including the most experienced practitioners.
This is well reflected in our Accenture Risk Study: 2024 Edition where over eight in 10 risk professionals say complex, interconnected risks are emerging more quickly. Among the top rising risks: operational risks (30%); financial risks (30%); and disruptive technology risks (29%), up nine percentage points since 2021. Also growing in importance since 2021 is regulatory and compliance risk at 27%, up eight percentage points.
You can’t think about risks in isolation.
Riccardo Roscini / Head of Group Enterprise Risk Management, UniCredit
Adding to the challenge, our research shows that individual risks can quickly become serious threats when interconnected, creating a web of risks to mitigate and manage. For example, operational risks are also escalating strategic, regulatory and compliance, financial, data risk and privacy breaches and disruptive technology risks. Complicating matters, risks are migrating across sectors and becoming a serious issue for our research respondents.
Companies need to think differently about mitigating and navigating risk. In part, this means modernizing the risk function’s skills and technologies. But it also means establishing a risk mindset across the entire organization so that every function and employee has the tools and capabilities to detect and mitigate threats. In today’s digital world, risk is everyone’s business because risk is everywhere.
Companies need to accelerate their response to a more pervasive and complex risk environment and take steps to reinvent their risk management. For guidance, they should follow the path set by the risk leaders surveyed as part of our Risk Study: 2024 Edition. They have more mature risk capabilities and are more responsive to emerging risks. They are more capable of identifying the impact of individual risks on each other and are far more active in prioritizing actions to prepare their risk function to address the growing level of complexity and the accelerated pace of today’s risk landscape.
These risk leaders demonstrate the value and benefits of expertly managed risk and can help the business push the envelope on growth and innovation by taking on more risk, safe in the knowledge that threats are detected, quantified and mitigated as effectively as possible.
The consensus from our risk research is that risk is everywhere. Yet, there is a lack of consensus around the urgency to respond and build the necessary capabilities and leadership to future-proof the risk function. Our client work consistently shows that a good enough mindset to risk management exposes companies to greater levels of threats and vulnerabilities while undermining business resilience and growth. Companies looking to reinvent and pivot their risk management can emulate risk leaders in four ways:
Risk has become so important that you now need some of your best and brightest employees working in the function.
Richard Treagus / Chief Risk Officer, Old Mutual
more risk leaders are very satisfied with their efforts to have risk work more effectively with other functions than peers with less mature risk capabilities.
more risk leaders strongly believe the risk professionals’ most important goal is to optimize new business activity than peers with less mature risk capabilities.
more risk leaders say they are bolstering business resilience than peers with less mature risk capabilities.
more risk leaders are implementing technologies to improve risk function decision-making than peers with less mature risk capabilities.
more risk leaders are improving their ability to detect and quantify risks than peers with less mature risk capabilities.
more risk leaders are very satisfied with their efforts to reduce the cost of managing risk through outsourcing and automation than peers with less mature risk capabilities.
Risk is everywhere, and our risk research confirms that across sectors and geographies, companies now face an interlocking web of business threats. Many are not prepared for the unfolding challenge. Their inadequate focus on risk across the organization leaves them vulnerable and undermines their reinvention. The path forward is clear: follow the risk leaders and turn hyper-disruption and escalating crises into opportunities to build business resilience and growth.