3 minute read 21 Mar 2019
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What is your biggest risk in the Transformative Age?

By

EY Global

Multidisciplinary professional services organization

3 minute read 21 Mar 2019
Related topics Trust Growth

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Thriving in the Transformative Age is about building a confident and trusted enterprise in order to optimize upside risk as a growth strategy.

Welcome to the Transformative Age.

Exponential change, brought about by rapidly advancing technologies, is upon us – and some futurists argue that the transformation we’ll witness in the 21st century will be equivalent to 20,000 years of progress in the past.

As our world changes, new risks emerge. Innovative technologies are disrupting traditional business models, exposing organizations to new risks in everything from supply chains to customer expectations, regulation to return on investment.

In the past, we’ve looked at risk through a narrow prism – it was something to be managed or eliminated. But thriving in the Transformative Age we’ve now entered demands more than careful management of downside risks. We must also seize upside risks as a source of competitive advantage.

In the Transformative Age, the biggest risk we can take is to do nothing.

Let me share with you just one example of what this might look like. The World Economic Forum’s The Future of Jobs 2018 report predicts that 42% of task hours will be undertaken by machines by 2022. What does that mean for skills development – and for the industry that develops those skills? The signposts may be pointing toward massive disruption, but plenty of vocational training organizations maintain their tried and true model.

But some vocational training organizations understand that the dynamics of education are changing as rapidly as the nature of work. One EY client is seizing the upside risks to trial and test new models, shift organizational structures and cultivate an innovation culture. In doing so, our client is laying the foundations for a thriving organization that can adapt to change, and add new value to customers, communities and the economy.

It’s not about removing the risk – because this is often impossible. Instead, it’s about building a confident and trusted enterprise in order to optimize upside risk as a growth strategy.

Business leaders must boldly move risk out of the back-office and integrate it into the transformation process
Heidi Riddell
Partner, Ernst & Young Australia and EY Asia-Pacific Advisory Risk Leader

Recently, EY teams took the pulse of 1,200 global risk professionals during an international webcast which explored how risk can exploited to create new value and competitive advantage.

The results of the poll were illuminating. All poll respondents had transformational projects underway, whether that was cloud (54%), digital (53%), automation (40%) or advanced analytics (37%).

Despite the headwinds of disruption blowing their way, 57% of respondents admitted the involvement of risk professionals in these transformation projects was either “limited or missing”.

Of the 300-plus participants from the Asia-Pacific region, 76% agreed that an integrated risk approach was essential to build trust and confidence as transformation projects unfold.

Around the world, a similar story is being told – despite the diverse economies and cultures in which risk professionals operate, all are facing the same types of challenges in the era of exponential change.

Involvement of risk professionals in transformation projects

57%

The number of respondents who admit the involvement of risk professionals in transformation projects is either “limited or missing”.

What we need is a fundamental shift in mindset. Risk can no longer be the responsibility of compliance teams. Business leaders must boldly move risk out of the back-office and integrate it into the transformation process so that everyone in an organization – IT, audit and legal, front-line employees, supply chain managers, product and service innovators and the board – understands what it means to make decisions that mitigate the downside and capitalize on the upside risks.

An integrated approach to risk management builds trust. The 2018 EY Global Alumni survey of more than 9,000 EY people, past and present, emphasizes the emerging trust deficit between public institutions, corporations and the community. The erosion of trust poses a serious risk to long-term value – whether that’s because fewer consumers are prepared to purchase a product or because governments introduce more complex regulation.

If your organization is only beginning to rethink its approach to risk, you’re not alone. Less than 12% of the risk professionals polled by EY said their risk function was fully integrated with digital transformation projects. So, consider these five questions for further thought:

  1. What does your organization’s portfolio of risks – upside, downside and outside risks – look like?
  2. Is your portfolio fit for the future or fashioned on the past?
  3. How do you digitize risk monitoring as your organization undergoes transformation?
  4. How can you adapt your business model to place risk at the forefront of all strategic planning?
  5. How can you manage the “duality of growth” by moving to a new business model while keeping your existing business running?

In the Transformative Age, the biggest risk we can take is to do nothing.

Find out how to look at risk through a new lens.

Summary

As our world changes, new risks emerge. Innovative technologies are disrupting traditional business models, exposing organizations to new risks in everything from supply chains to customer expectations, regulation to return on investment. Risk can no longer be the responsibility of compliance teams. Business leaders must boldly move risk out of the back-office and integrate it into the transformation process so that everyone in an organization – IT, audit and legal, front-line employees, supply chain managers, product and service innovators and the board – understands what it means to make decisions that mitigate the downside and capitalize on the upside risks.

About this article

By

EY Global

Multidisciplinary professional services organization

Related topics Trust Growth