Types of risks & their impact on organizations
A recent global survey of top-level executives across industries was conducted by Protiviti. This survey highlighted the influence of economy, talent, digitization & work culture on the types of risks an organization can face in 2020.
The survey was conducted globally on 1063 board members and C-level executives. It highlights their perspective on risks that the organizations will face from the following three dimensions:
- Macroeconomic Risks – are the risks related to the economy, financial markets, government policies and other external factors not in control of an organization.
- Strategic Risks – Risks related to the company’s strategy for further growth & diversification, implementation of new technologies and keeping up with the competitors.
- Operational Risks – Risks affecting the day-to-day operations of the organization viz. employees and processes and other internal factors that can be controlled by an organization.
According to the survey, the top 10 risks for companies in 2020 are :
- Impact of regulatory changes and scrutiny on operational resilience, products, and services.
- Economic conditions impacting the growth
- Succession challenges; ability to attract and retain talent
- Ability to compete with “born digital” organizations and other similar competitors
- Resistance to change operations
- Cyber threats
- Privacy and identity management and information security
- Organization’s culture may not encourage timely identification and escalation of risks
- Sustaining customer loyalty and retention
- Adoption of digital technologies may require new skills that are in short supply
According to most of the executives, “concern about the economy” is a top-rated risk. This risk has jumped from the eleventh spot in 2019 to the second spot in 2020. The recent ups and downs in the global economy due to the America-China trade war, Brexit, bans of Iran, etc. seem to be some of the major concerns for businesses across the globe.
As per the survey, these risks are mostly based on themes of:
- Talent and culture: which includes risks number 2 and 10 listed above. These pertain to the risks that the companies face while acquiring talent, retaining them & also adopting the latest technologies that will require special knowledge.
- Technology and innovation: come with issues like the company’s ability to introduce and handle technology and digitization of its operations. This theme surrounds risk numbers 4, 6 and 7 from our list.
- Risk 4 shows how existing processes and legacy IT systems may be insufficient to compete with ‘digital-born’ organizations already implementing the latest technologies.
- Risk 6 and 7 are concerns about identity management, data security & privacy, and cyber threats. Moreover, customer loyalty also depends on the organization’s use and implementation of technology.
As per the report, the executives perceive the severity of risks will be less in 2020 as compared to 2019. Moreover, only two risks were identified as “significant impact” risks. Overcoming those risks is possible if the organizations stay agile, create their risk strategy while considering the above risks as a priority. Additionally, hiring C-Suite executives with knowledge of dealing with such risks is an added advantage.