The risk landscape is changing fast. Every day’s headlines bring new reminders that the future is on its way, and sometimes it feels like new risks and response strategies are around every corner. The outlines of new opportunities and new challenges for risk leaders, indeed, all organizational leaders, are already visible.
So what should leaders prepare for? This RMA article identifies 10 trends that have the potential to considerably change the risk landscape for companies locally & internationally, and change how they respond to and manage risk.
Explore 10 factors shaping the future of risk
What you will see is that risk’s onset and consequences, and the entire nature of the risk discipline, are evolving. The good news? The strategic conversation around risk is changing too. For leaders today, risk can be used as a tool to create value and achieve higher levels of performance. It is no longer something to only fear, minimize, and avoid.
Ask yourself: will your organization be able to harness the below factors to be even stronger, more resilient?
How are organizations’ responses to risk changing?
- Cognitive technologies augment human decision-making
Driven by developments in artificial intelligence (AI) and easy access to huge amounts of data, smart systems will assist, and at times even replace, human-led risk management.
- Controls become pervasive
In a sensor-enabled, hyper-connected environment, organizations will deploy pervasive controls as part of their products, services, and business models to monitor and manage risk in real time.
- Behavioral science informs risk insights
Advances in behavioral sciences will fuel efforts to understand risk perceptions, influence risk behaviors, and improve risk-related decision-making.
- Vigilance and resilience complement prevention as leading practices
Organizations are realising that 100 percent risk prevention is not feasible, so investment in vigilance (detecting risk events as they happen) and resilience (containing and reducing the impact of risk events) will increase.
- Risk transfer broadens in scope and application
Risk transfer instruments, such as insurance, contracts, and novel financial instruments, will increasingly be used by organisations to protect them from a wider range of risks – cyberattacks, climate change, geopolitical risks, terrorism, business disruptions, and more.
How are consequences of risk for organizations changing?
- Innovation leads, regulation follows
The marketplace will reward organisations that take on strategic, high-risk innovations—even if they fall outside the scope of existing regulations.
- Risk becomes a performance enabler
As risks become more measurable and tangible, companies & businesses will be better able to determine an accurate upside value for risk—and encourage an appropriate level of risk-taking.
How is the onslaught of risk changing?
- The networked economy demands collective risk management
As businesses engage more deeply with a large number of external stakeholders, including “crowds,” they will rely more heavily on them to identify, manage, and reduce risks together.
- Disruption dominates the executive agenda
The constant threat of disruption resulting from emerging technologies, business model transformations, and ecosystem changes will force executives to make significant strategic choices to drive organisational success.
- Reputation risks accelerate and amplify
To survive in a hyper-connected world dominated by mobile devices, social media, and evolving expectations from society, leaders will proactively address accelerated, amplified risks to their companies’ reputations.