Posted by New Delhi: Digital and other transformations are crucial for businesses and organisations to move ahead digitally. However, the speed of digital and other transformations in organisations throw risk management challenges for business executives revealed a new survey.
Nearly 8 in 10 business executives in India say that keeping up with the speed of digital and other transformations is a significant risk management challenge. This is according to PwC’s 2022 Global Risk Survey: India highlights. The report found that 6 in 10 executives feel the need to actively seek external insights to assess and monitor risks in the increasingly disruptive business environment.
Some 109 Indian respondents participated in the survey which included leading business executives (72% of the sample) and the rest comprised risk management (13%), audit (10%) and compliance (6%) professionals.
According to Sivarama Krishnan, Partner and Risk Consulting Leader – PwC India, organisational risk management and broader resilience capabilities need to quickly adapt to support business agility and contribute proactive, robust and timely risk insights for decision making.
“In an environment, where change is constant, risk management capabilities provide the greatest value to board members and business leaders when they are embedded within the organisation’s strategic planning and decision-making processes. Informed by a panoramic view of emerging risks, business leaders can make confident decisions in pursuit of their strategy,” added Krishnan.
The changing work environment brought on by the pandemic continues to disrupt talent and labour markets. Supply shortages, sanctions and rising raw material costs are heightening risks within supply chains as organisations deal with upstream supply chain risks related to subcontractors and other fourth parties that further complicate risks.
Customers, investors and other stakeholders are laser-focused on ESG, including the physical and transition risks that a changing climate poses. Each of these risks can cause significant impacts, but because they are also highly interconnected with far-reaching implications across the enterprise and put brand and reputation at stake.
In this turbulent business environment, many executives find the need to revise and adapt their strategies and operating models at a rapid pace. In this context, PwC’s 2022 Global Risk Survey highlights five key actions that organisations should consider to drive their risk management capabilities forward:
- engage early and get risk insights at the point of decision
- take a panoramic view of the risk
- set and employ risk appetite to take advantage of the upside of risk
- enable risk-based decision-making through systems and processes
- double down efforts on top risks.
“Any one person cannot manage risks. When it comes to business, risk management is the ultimate team sport. Teams across all the three lines of defence in risk management need to work together to build a risk resilient organisation and thrive in an environment which is turbulent and disruptive,” Krishnan added.
Investment in risk processes, frameworks and enabling systems is needed to help an organisation deploy a standardised and consistent approach to risk management. While 76% of organisations report that having technology systems that don’t work together is a significant risk management challenge, just 28% of those are addressing that challenge in a formal, enterprise-wide manner.
Risk appetite is a critical tool to help business leaders understand where they are able to take more risks in pursuit of new opportunities and growth. It denotes the guardrails within which the board asks executives to stay as they make decisions and execute on their strategies.
Risk culture also plays a role in taking advantage of the upside of risk. A too strong compliance culture can stifle innovation, for example, while too weak of a compliance focus can impact brand and reputation.
The survey also revealed that when organisations embrace risk management capabilities as a strategic organisational capability, they are five times more likely to be very confident in delivering stakeholder confidence, a growth-minded risk culture, increased resilience, and business outcomes.
And they’re almost twice as likely to project revenue growth of 11% or more over the next 12 months. Strong risk management capabilities help protect the organisation from downside risks and enable the organisation to look forward and take risks in pursuit of growth. It’s a win-win situation.
The top 10% of respondents – the ones that are realising the benefits of strategic risk management practices – expect faster revenue growth and better outcomes.