Protiviti reveals the top 10 operational risks for executives in 2020

Hong Kong, February 14, 2020 – With ever-present concerns over cyber threats, increasing market disruption, and the rise of artificial intelligence organizational leaders around the globe have a lot to be concerned about. A rapidly changing business environment and the potential for unwelcome surprises vividly illustrate the reality that organizations of all types face risks that can either disrupt their business model over time or damage brand image and reputation overnight. This is according to the recent 2020 Top Global Risk report conducted by consulting firm Protiviti together with NC State University's ERM Initiative reveals global executives' perspective on the operational risks in 2020. 

This year’s respondent group comprises of 1,063 board members and C-suite executives from all major regions of the world, including Asia, on their perspective of the major risks businesses are likely to face this year. While survey respondents felt that the overall, global businesses faceless in 2020 relative to 2019, significant concerns still abound.

2020 Overall Major Findings 

Board members and C-suite executives worldwide perceive a slightly less risky business environment in 2020 compared to 2019, with only two of the top 10 risks rated higher in 2020 than they were in 2019. It is important to note however, that even though there is a slight reduction in risk concerns this year, it is still much higher than two years ago. While the top risk issue globally in 2020 is regulatory change and scrutiny, the number 2 risk, economic conditions, is notable in that it was not among the top 10 risks in 2019. A new risk added in this year’s survey made it to top 10 (tenth overall), which is the ability to attract, retain and reskill talent needed for organizations to adopt digital technologies (e.g., AI, robotics, natural language processing, among others). Other operational concerns dominate the top 10 global risk issues, including succession challenges and resistance to change. This suggests on the surface that respondents continue to be focus on operational issues to a greater extent than strategic or macroeconomic risks.

“Undoubtedly, the global epidemic such as the recent outbreak of Coronavirus will have devasting impacts, in both immediate and long-term aspects, to the economic conditions, which ranks No.2 in the Top 10 Risks, in our survey, which also maps out other key risk issues on the minds of directors and executives across the globe. The mapping is crucial, now more than ever, for businesses to design and implement effective risk management capabilities and response mechanisms to maintain agility and resilience.” Comments Adam Johnston, Country Leader and Managing Director. “Globally, operational concerns with strategic underpinnings dominate the Top 10 global risk issues. There are two themes reflected in the findings of our survey that indicate concerns from business leaders as they look forward to 2020 – talent and culture as one and technology and innovation as the other. These two interrelated themes are especially relevant in the coming year as organizations globally strive to strengthen their competitive position by advancing their digital maturity and embracing the transformative potential of technology.”

Concerns for Asian Companies 

Concerns about economic conditions restricting growth opportunities jumped to the number two spot this year globally and were selected as the biggest risk for Asian Organizations. This was followed by regulatory changes, succession challenges/attracting talent, and privacy/identity management. This result is not surprising as APAC is still the fastest growing region in the world, contributing two-thirds to global growth, but near term, prospects have deteriorated noticeably over the last year and are trending downward. “This year’s top risks suggests that directors and executives are very concerned about competition with ‘born digital’ companies, shifts in the economy and the impact of regulation on their ability to transform. These issues are inextricably linked to concerns around the ability to attract talented leaders who can take the business forward in the digital age and organizational resistance to change; these concerns could relate to fears that the organization’s leaders are not digital ready and change is needed, but not attainable due to cost and cultural constraints and inability to attract the necessary talent." adds Johnston.

A Call to Action: Questions to Consider 

“The world is changing such that taking risk means much more than introducing new products and entering new markets." The ever-changing risk landscape and overall perceived magnitude and severity of risks should prompt boards and senior executives to closely scrutinize the approach they use to keep an eye on emerging risks. Those who continue to manage risks the way they have for many years will eventually realize, once it is too late, that the level of investment in risk management and their willingness to engage in robust tools are inadequate. "In this digital age, enterprise risk management has an important role to play in strengthening and nurturing the appropriate risk culture that facilitates the initiative, creativity, innovation and digital thinking so critical to success." Boards of directors and executive management teams cannot afford to manage risks casually on a reactive basis, especially considering the rapid pace of disruptive innovation and technological developments in an ever-advancing digital world.

Top 10 Risks for 2020

 

 

 

 

 

 

 

 

 

 

 

*Scores are bades on 10-point scale, with "10"  representing that the risk issue  will have an extensive impact on the organization

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