5 minute read 22 Jan 2019
Boy meeting new pet

Four ways to build a relationship between risk and trust

By

Amy Brachio

EY Global Advisory Risk & Performance Improvement Leader

Industry leader in risk management. A voice for working women. Passionate about diversity and inclusiveness. Mother. Wife.

5 minute read 22 Jan 2019

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‘Trust by Design’ will enable us to help clients become digitally confident and trusted enterprises that have the intelligence and insights to drive growth, increase business value and maintain stakeholder trust.

Recently I’ve talked a lot with other members of the EY risk global leadership team about trust. In particular, we’ve discussed how organizations might operate differently if their decisions were always guided by a relentless focus on trust.

The issue of trust is really important to me, both personally and as a risk professional. It is also a crucial issue for every organization on the planet, no matter how big or small it is. That’s because an organization that loses the trust of its key stakeholders – among them customers, employees, regulators and suppliers – is at risk of running itself out of business.

Trust lies right at the heart of every single relationship that exists. As businesses, consumers, and individuals, we buy from people and organizations that we trust. We cooperate with people and organizations that we trust. We believe in people and organizations that we trust. Trust is an extremely valuable commodity that takes years to build, but can be lost in a matter of seconds, especially in this digital age.

Unfortunately, you only have to read the 2018 Edelman Trust Barometer to understand that trust is in decline globally. A total of 20 out of the 28 markets covered in the survey fall into the category of distrust (meaning that average trust in businesses, governments, non-governmental organizations and the media in those markets is below 50%). Meanwhile, 7 in 10 respondents said that building trust is the number one job for CEOs, ahead of developing high-quality products and services.

So where does trust fit into the risk landscape?

For me it comes down to taking a step back and thinking about the changes that are happening both inside and outside of organizations, which, in turn, affect how trust intersects with risk. Today, organizations are managing evolving consumer behavior; forming new partnerships; converging with organizations in other sectors; and adapting to new business ecosystems. CEOs and C-level executives are also being challenged by younger generations to disrupt their businesses. At the same time, the external landscape is changing dramatically in areas ranging from climate and technology, through to geopolitics and trade.

Every industry is changing and the cycles of change are accelerating more quickly than ever. Indeed, we’ve never moved as fast as we’re moving right now, and the pace will probably only get quicker. The nature and scale of this change also mean that trust has never been more important. In today’s world defined by disruption and uncertainty, trust is the new currency and the new source of value. Organizations recognize that trust is critical to sustaining consumer loyalty and differentiating their brand in a competitive marketplace.

The rapid pace of disruption brings new risks and threats for organizations. It also requires them to find a different way of managing risk, one that acknowledges the role of trust as a competitive differentiator.

How organizations can transform the way in which they manage risk

So how can organizations transform the way in which they strategically manage risk across the enterprise, building-in trust by design?

1. Balance risks for competitive advantage

As a starting point, organizations should recognize the need to balance upside, downside and outside risks to achieve a competitive advantage. Historically, risk management functions have tended to focus on risk avoidance. Increasingly, however, they will be called on to help their organizations balance opportunities with threats, while also monitoring what’s going on externally to help address any issues that arise.

2. Embrace new digital thinking

It is also essential to instill the right risk mindset across the organization. This means embracing new digital thinking as well as involving a diversity of talent – especially in cybersecurity – to introduce a broad set of perspectives to the risk management process. This mindset needs to recognize that risk management is an enabler of trust and confidence, not just as an enabler of risk avoidance. It’s about flipping our thinking from, ‘what could go wrong?’ to ‘what has to go right’?

3. Embed risk management

Organizations need to embed risk management thinking into product and service design as well as into operations, so that they can accelerate their speed to market and innovate continuously while sustaining stakeholder trust along the way.

4. Digitalize risk function

It is vital to digitalize the risk function so that it has better access to higher value information in real time. This will enable dynamic decision-making that is aligned with the organization’s strategic objectives.

More and more large organizations are now recognizing the importance of trust and taking steps to address trust issues. At EY, we are launching our ‘Trust by Design service in response to our clients’ growing demands for advice on how they can embed trust as a design principle into their businesses. ‘Trust by Design’ will enable us to help clients become digitally confident and trusted enterprises that have the intelligence and insights to drive growth, increase business value and maintain stakeholder trust.

Risk and trust are inextricably intertwined. In fact, loss of trust is possibly the biggest risk that a business can ever face since everything else depends on it.

Every business should ask itself these questions:

  1. How does your strategy and operating model create the foundation for trust?
  2. How do you build and protect customer trust in your organization?
  3. Which trends are having the greatest impact on your organization and industry?
  4. What types of disruption are you seeing in your business (for example, implementing emerging technologies, new customer journeys and experiences, and alternative business models) and how have these trends impacted the way your organization manages risk?
  5. How have these trends and new disruptions impacted the way your organization manages risk?
  6. How integrated is the risk function with your company’s digital transformation projects?
  7. How do you envision the future of risk?
  8. What kind of disruption is needed in risk functions to deliver strategic value?

What’s possible in the Transformative Age? Join EY to discuss this and all the pressing economic and social issues as we look to the World Economic Forum Annual Meeting 2019 – from 22-25 January. Join the debate via ey.com/wef and using #WEF19 and #BetterWorkingWorld.

Summary

Every organization today should be asking itself whether its approach to risk management is evolving as quickly as its surrounding environment. It should also be exploring how it can draw on the expertise of its risk function to design trust into all of its products, services and processes. 

About this article

By

Amy Brachio

EY Global Advisory Risk & Performance Improvement Leader

Industry leader in risk management. A voice for working women. Passionate about diversity and inclusiveness. Mother. Wife.