Top executives are struggling to keep up with an ever-growing array of risks as rising inflation, supply chain constraints and the war in Ukraine add to earlier concerns about cybersecurity, ransomware and rapid technological change.
A recently opinion poll of PricewaterhouseCoopers found that 79% of 3,584 business and risk, audit and compliance executives surveyed in February and March said that keeping up with the pace of digital and other transformations is a major challenge.
“We have identified that some of the most important risks associated with revenue growth are general macro market risks, business and operating models, and changes in business operating models,” said Elizabeth McNichol, enterprise tech leader of PwC’s Cyber, Risk & Regulatory practice. “Of course, cyber and information management involve significant risks.”
Businesses are embracing risk management technology more, with 72% planning to increase spending on technology to help identify and manage risk. The survey found that 39% of executives surveyed said they make better decisions and achieve sustainable results when they consult with risk experts early on.
“Involving risk management functions at the start of new projects or other strategic initiatives is something that many of our respondents felt was absolutely critical,” said McNichol. “It allows them to make better decisions. You are able to achieve more sustainable results. Essentially, they embed risk as part of corporate culture and make everyone a risk-aware professional.”
Diversity has also become more important, with 70% of respondents saying they prioritize diversity within their risk teams.
“The overarching goal here is that you need to get a panoramic view of risk,” McNichol said. “It’s really a 360-degree view of the risk. The way I picture it as a head on a swivel to see what’s coming from all angles. A diverse team that contributes diverse ideas is crucial to achieving this panoramic view. You will be better able to get a full picture of the risks your business faces when you sit down with a team that has different viewpoints.”
While 38% of respondents said their risk function does not actively seek external insight to assess and monitor risk, accountants and auditors can play an important role in the risk management process.
“If I put my auditor’s hat on and look at it not just from a financial perspective but also from an operational perspective, including the operational audit, I think what I would be looking for in terms of auditing the risk function, a function that really gets into the lifecycle of a major project or strategic initiative.” embedded?” said McNichol. “For example, within an ERP transformation or a technology-enabled business transformation, is there a workflow that focuses on risk, rather than just risk in the program itself? Am I thinking about new risks that might exist because of this transformation I’m going through, and how do I start preparing for these new risks?”
Adaptations are needed in risk management, with 22% of survey respondents saying they are reaping benefits from defining or recalibrating their risk appetite and risk thresholds, while 56% are investing in risk culture and considering behavioral risk in 2022. Despite concerns, 47% of respondents said they are very confident in their risk department’s ability to build a more risk-aware culture.
“The key takeaway is that panoramic view,” McNichol said. “It’s about embedding the right team in the organization’s strategic initiatives. Whether it’s transformative initiatives like an ERP implementation or strategy-related projects, it’s crucial that a risk team is involved, and then it’s also important to increase the organization’s overall risk IQ so that you have more risk-aware professionals create .”