Across the business world, businesses in all industries are worried about the pace of change. That’s according to Gartner’s most recent Emerging Risks Monitor Report, issued last month.
Among the 133 senior executives surveyed, 71 percent cited the pace of change as a key risk facing their organizations.
Why do executives feel like they won’t be able to respond quickly enough to a shifting business landscape? The answer comes courtesy of two of the other top emerging risks: lagging digitization and digital misconceptions.
Basically, organizations are concerned their digital initiatives are moving too slowly, and they could fall behind and become less relevant. Yet part of the reason they are moving slowly is the fear that changing the business model to keep pace with digitization could introduce new, unknown risks.
It’s kind of a catch-22. Organizations are afraid of change, but they are also afraid not to change.
What can an organization do to ensure it's successfully aligning itself with an evolving business landscape without exposing itself to undo risk?
I’ve said it before, and I’ll say it again. It’s all about enterprise risk management (ERM).
Note: Accelerating privacy regulation is no longer considered an emerging risk and has been upgraded to an established risk.
The biggest obstacle to strategic success is failing to understand risk.
To achieving strategic success, an institution must identify, assess, and prioritize risks and then coordinate and apply resources to minimize, monitor, and control the probability and/or impact of unfortunate events or maximize the realization of opportunities. It means having systems in place to measure and monitor risk and using that data to adjust plans and controls as needed.
ERM is a top-down approach to risk management where voices from across an institution work together to integrate strategy-setting with risk management to create value. It invites ideas from all areas of the institution, revealing potential weaknesses, but also hidden strengths. An in-depth approach to risk management not only controls the probability or impact of unfortunate events, but also helps maximize the realization of opportunities.
Unfortunately, many organizations aren’t being proactive when it comes to these risks, particularly the pace of change. While 76 percent or organizations are taking action to address this risk, only 28 percent are elevating the risk to the board, Gartner reports.
That means this risk is being dealt with in a scattershot approach — perhaps by IT or another department — instead of being addressed at the top and included in the organization’s strategic plan.
My advice to organizations worried about the pace of change as an emerging risk is to take a step back and look at risk holistically. No organization wants to be left behind, but taking action without understanding the big picture is a recipe for disaster.
Every strategy has risk, but not every risk is worth taking. By aligning risk with strategic planning, a financial institution is not just ensuring that its strategic decisions align with its mission, vision, and values, it illuminates potential hazards and rewards so that an institution can follow its destiny in the most intelligent way possible.