Businesses facing rapid change, emerging threats and unforeseen disruption must prioritise proactive risk management and build the right culture to support it, writes Andy Banks.
Risk is unavoidable and, as the pace of change continues to quicken, managing risk is becoming a bigger challenge for all organisations.
Disruption—be it geopolitical, environmental, social, or technological—is impacting societies at every-greater speed, making the risk landscape facing businesses more volatile and uncertain than ever before.
It is not enough to stand still. In an increasingly unpredictable world, companies need to rethink their fundamental risk management principles to help protect and grow their business no matter what might lie ahead.
So, where to start? Through our own research, we have found that four key characteristics can help to future-proof businesses facing greater risks.
1. Be forward-looking
Recent events have underscored the need for organisations to be more proactive in scanning the horizon for risks, from industry regulations to systemic global disruption.
A range of new threats are now emerging, and many have no precedent. As a result, we can't always use past events to tell us what comes next.
Instead, organisations should consider what they learned in the past about handling major disruption and use this assessment to prepare a flexible response to future threats.
2. Be transparent and build a culture of trust
The pandemic has further demonstrated that you can earn or lose trust depending on how you respond to the threats and challenges you face.
Organisations should consider how they can embed a culture that supports transparency, particularly when it comes to identifying and addressing risk.
This will be crucial as we all respond to major macro-challenges that require trust and transparency to forge a culture of accountability and drive positive behaviours.
3. Be resilient
Many of the risks facing organisations are unavoidable. This is not just true of the COVID-19 pandemic—it is also true of other systemic issues, from supply chain disruption to cyber crises.
The focus, therefore, needs to be on ensuring that your organisation can weather the storm, adapt, and emerge stronger.
4. Be inclusive
The scale and interconnectedness of the risks facing organisations and society at large demands a collaborative response.
This comes in many forms, from being open to new ideas, and seeking perspectives from different people, to co-operation between industries and sectors.
We can't overcome systemic challenges without asking for help and working together on shared solutions.
Risk journey questions
Kick-start your organisation’s risk management journey by considering these 10 key questions:
- Is your risk management framework forward-looking and comprehensive? Does it align with your organisation's purpose and values?
- Is your business strategy translated into a risk strategy and risk appetite framework, as the foundation for all risk management processes?
- How does the risk function contribute to decision-making?
- How do you develop tangible data insights to model and quantify risk so that threats can be prioritised and measured using imaginative thinking?
- How is the organisation accountable to employees and other stakeholders?
- How does your organisation promote trust and transparency when it comes to equity and diversity?
- Is your risk appetite framework understood, implemented and used to steer the day-to-day business?
- How does risk management support agile and responsive decision-making?
- How diverse are the teams within your organisation?
- How does your organisation listen to different voices that can challenge entrenched habits and viewpoints?
Andy Banks is Partner of Risk Assurance Services at PwC.
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