Key issues being discussed in the boardroom and C-suite

(Research Conducted by North Carolina State University’s ERM Initiative and Protiviti)

The July, 22 issue of Independent Directors’ Databank shares a research report from a renowned institute of the world as captioned above, which sheds lights on various important aspects of Risks being the top agenda items in boardroom discussions and have become inseparable part of strategic deliberations amongst the C-Suite leaders. This research report ranks some key risks in post-pandemic economic world. The report has also projected for the likely risks on the radar of companies in 2031 as well. The key outcomes of the research exercise are as follows-

2. The Report shares an overview on Annual Risk survey conducted among directors and executives worldwide to figure out various risks which are likely to affect their organizations in present and how these risks will affect their organisations a decade from now (in 2031). These risks are categorised in three dimensions-

• Macroeconomic risks likely to affect their organisation’s growth opportunities
• Strategic risks the organisation faces that may affect the validity of its strategy for pursuing growth opportunities
• Operational risks that might affect key operations of the organization in executing its strategy

Many of the same risks remain top of mind this year as last year; however, the way risks are being prioritized is changing fast, the study says.

3. The global marketplace is dramatically impacted by these (mentioned above in table) and a host of other notable risk drivers triggering significant levels of uncertainties that make it extremely difficult for an organisation’s leaders to anticipate what risks may lie just over the horizon. Unanticipated events are unfolding at record pace, leading to massive challenges to identify the best next steps for organisations of all types and sizes, regardless of where they reside in the world. As there is no immunity to uncertainty for anyone operating in the eco-system, C-suites and boards need to be more vigilant in scanning the horizon for emerging issues. Because it is impossible to anticipate everything of significance that lies in the future, organisations must focus on building trust- based, resilient cultures that can pivot at the speed of change.

4. The scope of risk concerns for the next 10 years pertains to the future of work and the workplace; talent acquisition, retention and succession; disruptive innovation, new competitors and sustaining customer loyalty; the economy; regulatory change; utilizing data analytics and “big data”; and organizational culture and the impact of a hybrid work environment and have been found as key takeaways from the research project. They can be scanned, discussed and deliberated by the boards for having suitable focus depending upon the nature of the company.

5. Additionally, for both 2022 and the next decade pertains to succession challenges and the ability to attract, retain and develop top talent in a tightening market. Further, the aspect of culture within the company also remains a priority. The rapid speed of disruptive innovation, threat of substitute products and services, and ease of entrance of new competitors into the industry are all top risks looking out 10 years. Most of these risks were ranked higher over the next decade than for 2022.

6. With a disruptive decade ahead, organisations embracing the long view with a trust-based culture, effective utilisation of predictive data analytics and the ability to pivot at the speed of change are more likely to sustain their relevance. A longer-term perspective helps leaders “reality test” their assumptions about markets and the business environment so that they are more prepared for unexpected surprises as well as more decisive and agile in making timely adjustments to the strategy and business model. It can reveal a number of different challenges than those that may be emerging short-term. Thinking long term about enterprise risks can impact long- term resiliency and preparedness for the next decade, complementing the organisation’s short- term risk awareness.

7. As per the survey, Respondents are mostly focused on risks impacting their competitive positioning in 2031, with six of the top 10 in 2031 linked to the competitive positioning of their brands, products and services. They are also concerned that the rapid speed of disruptive innovations may outpace their ability to respond, and they are mindful that substitute products and services may emerge from competitors that enhance the customer experience and affect the viability of their current business models and planned strategic priorities. All sizes of organisations share concerns about the adoption of digital technologies (e.g., AI, automation in all of its forms, natural language processing and other technologies) in the marketplace and their ability to recruit and/or upskill and reskill existing employees.

Responses of CEOs, CFOs, CROs, CTOs, CSOs, CDOs  and other C-suite executives are also recorded on various risks, priority lists and perception for the next decade.

8. From the Industry specific point of view, the 2022 Top Risks survey results reflect a resilient financial services industry that is nevertheless acutely sensitive and responsive to the growing long-term threats of disruption to its business model. The 10-year risk outlook among financial services industry organisations indicates that board members and senior executives view a notably riskier outlook for the next decade. At the same time, financial institutions face unrelenting pressure to invest in technology and fend off a growing threat from digital disruptors. How the industry responds to ESG demands — both with respect to its own operations directly as well as those of the clients that it lends to, invests in and insures — will become increasingly important.

Because risks are constantly changing, the risk management process needs to be repeatable, clearly defined and adequately resourced to ensure business leaders receive the information they need to stay abreast of emerging issues.

IICA duly acknowledge the ownership of work done by NC State University’s ERM Initiative and Protiviti research team.

Full research report can be accessed here