Risk management is in no way linear, and it is respective to the times. Today’s business leaders must look at present risk trends with a sharp and vigilant eye toward future risk trends. The COVID pandemic and economic decline of 2020 will prove to be a key learning model as we look to the future and develop fresh strategies.
Main Enterprise Risks in 2021
Although risk is a part of the business landscape, effectively managing risk by minimizing vulnerabilities and threats may prove to be even more challenging. In one particular survey, when business leaders were asked to identify the top risks for 2021 and beyond, 68% of them identified the following.
- Business disruption caused by prolonged or repeat lockdowns.
- Operational resilience, production continuity, and interruption of supply and delivery.
- Limited growth due to economic conditions.
- Difficulty in attracting and retaining top talent.
- Inability to compete with companies that pivoted at the outset of the pandemic.
- Lack of organizational agility because of resistance to change.
- Insufficient preparedness for cyber threats.
- Challenges protecting the company’s security infrastructure.
- Existing company culture magnifying risk issues.
- Difficulty sustaining customer loyalty and retention through the pandemic.
- Workforce training challenges with work-at-home setups.
- Innovation and emerging technologies that disrupt core business models.
Uncertainty Is High in Today’s Risk Landscape
Business complexities and stakes have continued to rise. Yet, business leaders found ways to overcome the financial crisis from last decade. Now, as the COVID pandemic continues, identifying future risks, and understanding the possible implications of those risks, is more critical than ever.
We know that risk can be found in every industry. Learning how to effectively manage that risk is the first step in mitigation. That’s why the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) create and publish standards as a blueprint for organizational information security.
Having a well-defined process can help steer your organization in the right direction as it relates to risk assessment, management, and analysis. While the issues never stop, there is a way to be prepared without causing panic within the organization. Knowing the types of risk your organization may face is the first step to put together an effective risk management plan. Here are a few things to consider:
1. Business Continuity Through and Following the Pandemic
Largely, the pandemic has proven what we already knew. Effective enterprise risk management requires a proactive, rather than reactive, approach. Pandemic planning is critical to business continuity and enterprise risk management. As we‘ve seen, and infectious outbreak has a widespread impact, not just on health, but on everything from compliance regulations to economics. Proper planning works to boost the company’s ability to respond quickly and effectively to related internal and external threats.
2. Emerging Technologies for Enterprise Risk Management
We know that AI, machine learning, big data analysis, and cognitive technologies will continue to shift the enterprise landscape. The vast array of emerging and improving cognitive technologies are already changing the way many businesses determine risk. Organizations are using smart machines to detect, predict and prevent risks in high-risk scenarios.
Most businesses collect massive quantities of data. Then they must find effective ways to analyze that data to derive invaluable insights. The key is correctly analyzing the data gathered to provide insight into potential risks and threats. This is not easy, and will probably require the assistance of experienced skilled internal auditors.
3. IoT Tradeoffs Between Risk and Security
Today, the Internet of Things (IoT) is helping enterprises spot risk events and track important risk factors. This technology has furthered the evolution of processing, computing, and analytic capacity. IoT facilitates new levels of insight into business processes that otherwise would be too difficult for management to analyze. It delivers real-time feedback about threats and opportunities, giving businesses the chance to take action when it counts.
With this technology, organizations can gain dynamic risk management and better decision-making related to cybersecurity, internal audits, supply chain management, finance and controls testing. Plus, businesses may find that IoT data can help reduce cybersecurity and fraud risks quickly and easily.
The Internet of Things (IoT) is only expected to expand beyond the year 2021. Though this presents some advantages, it doesn’t come without risk. With the increasing use of connected and smart devices, it’s important to continually evaluate vulnerabilities and implement protective measures. IoT devices must be ready to resist physical tampering, operate in a “hostile” network environment and recover from malicious attacks.
4. The Rise of Risk Transfer
Impact risk events such as political unrest, climate change, and terrorism are expected to pose threats in the coming years. As the coronavirus pandemic rages, global financial crises, cyberattacks, and disruption to business are also significantly impacting most industries. These real threats point to the need for effective risk transfer tools and third-party risk management solutions. And traditional risk transfer tools – like contracts and insurance – may take on greater importance when it comes to these “mega-impact” risk events.
5. Reputation Risk Poses High Stakes
Rapid-fire communication via email, texting, and social media makes it nearly impossible to make an error without it becoming big news in an instant. An organization’s reputation could take a massive hit from which it may not easily recover.
Companies must be very careful to avoid the risk of escalation from careless information exchanges. By being proactive in addressing accelerated risk, they could potentially turn those risks into strengths for the organization. This is the power of successful reputation risk management. And we saw some clear examples of corporate reputations being damaged or bolstered in 2020.
6. Future Success Drivers
While embracing risk may be difficult, some organizations see this as a viable opportunity to raise the stakes. There is a growing number of businesses that are shifting perspective and looking at risk as a performance enabler.
Many C-Suite team members are looking at success drivers with a positive perspective in 2021, considering risk as an effective way to positively drive value and performance. Instead of operating risk management out of a sense of fear, many business leaders are using tangible and meaningful risk measurement metrics to their benefit. This powerful information fuels smart risk-taking ventures and helps pin-point the balance between risks and rewards.
It’s not all bad news, read: 5 Examples of Positive Risk.
Moving Confidently into the Future
Is your organization ready to move into the future? Do you have an effective strategy in place for risk analysis, assessment and management? It’s vital to have a team that understands how to carefully analyze every aspect of your organization’s infrastructure. Risk analysis and assessment work hand in hand to identify future risk and determine the company’s ability to successfully avert or tolerate those risks.
Financial markets are transitioning, there are mounting legal liabilities, credit risks, cyberattacks, and other events that could undermine the viability of your organization. So, not setting effective risk management protocols real leaves your organization more vulnerable than ever before. In order to avoid risk, you must know what effective risk management looks like.
Risk management is identifying, analyzing, evaluating, and prioritizing risks. It’s a plan to implement the right procedures, risk control, and financial resources for handling any crisis that occurs. The right risk management team has experience and training in helping alleviate risk within an organization at every level. Working with a technical partner to ensure it’s done right makes a difference.
Will Your Organization Stand Up to the Biggest Concerns of 2021?
Enterprise risk— detecting it, managing it, and preventing it—is not static. Corporations must monitor trends and consistently make improvements to stay up to speed, in 2021 and beyond.
If you’re not confident that your organization can withstand multiple risk threats, it’s time to partner with a team that can help. I.S. Partners specializes in finding potential risks and helping to manage them while decreasing vulnerability. For more information, contact us or call 215-631-3452.