The Top Risks in 2021: A Global Perspective

TOP RISKS FOR 2021:

1. Impact of pandemic-related policies and regulation on business performance
2. Impact of economic conditions on growth
3. Pressure of pandemic-related market conditions on demand
4. Adoption of digital technologies may require new skills that are in short supply
5. Privacy, identity management and information security challenges
6. Cyber threats
7. Impact of regulatory change and scrutiny on operational resilience, products and services
8. Leadership succession challenges; ability to attract and retain top talent
9. Resistance to change operations and the business model
10. Ability to compete with “born digital” and other competitors

In the points above, we rank the highest-rated risk themes in order of priority to provide a context for understanding the most critical uncertainties companies across the world face looking forward over the next 12 months. Key takeaways are summarised below.

Prepare for the next decade and embrace the global megatrends, for the future may arrive sooner than you think. There was nothing unpredictable about 2020. Pandemic risk has loomed on the horizon for a long time. Overpopulation, large and dense cities, global travel, and the SARS and Ebola pandemics since the turn of the century: The signs were there. And like many “gray rhino” risks, it has always been a matter of when — not if. Yet, only digitally invested companies were “future-ready” when COVID-19 hit. The only challenges these companies faced, in some cases, were coping with overwhelming demand and managing accelerated growth. The message: Recognise and understand how known megatrends can ultimately impact the customer experience, how people work, the supply chain and industry fundamentals, and act on that knowledge in a timely manner.

The pandemic experience has changed the world. The ongoing COVID-19 pandemic, its effects on governmental public health policies, customer behavior and business performance, and the economic distress it has wrought on the marketplace are the top three risks on the minds of board members and C-suite executives for 2021. In industries not dependent on the physical concentration of people, digital leaders stood out in pivoting and quickly reacting to the pandemic’s new normal by engaging customers, innovating new products and services, obtaining better market intelligence for decision-making, and maximising operational efficiencies.

Digitally prepared companies will most likely continue to maintain their edge going forward into the next “new normal” as they innovate continuously and their business models evolve. Hoping that markets will revert to where they were before the pandemic is not a viable strategy.

The 2021 risk landscape reflects a broad range of human resources priorities. Executives are concerned about several interrelated people issues:

• The safety and relevance of their people
• The strength of the executive bench in supporting leadership succession planning
• The organisation’s ability to attract and retain experienced top talent needed to execute complex strategies, improve digital intelligence and maturity, and facilitate the organisation’s resilience in facing the future

In addition, the realities associated with the future of work is the fourth-rated risk. As the future of work evolves through digital transformation and acceleration, companies will need to upskill and reskill displaced workers to take on new job functions and fill talent gaps.

Building organisational resilience and an innovative culture is an imperative. Thriving in a dynamic and unpredictable business environment requires that organisations secure data and information systems and build and sustain an adaptive and innovative culture, as the risks that dominate the rest of the top 10 risk list for 2021 demand. The sustainability, security and reliability of systems and operating infrastructures that have been affected by the realities of conducting business in the current constrained environment continue to be top of mind.

Regulatory change is also a related top 10 concern. It could obstruct some industries’ efforts to implement necessary improvements to operational resilience and products and services to compete successfully in the global marketplace. With the emphasis on climate change and global warming, some industries face significant changes in fundamentals as companies are forced to commit to net zero carbon goals.

Aside from the top 10 risks, the risks reflecting the greatest year-over-year increases add to the picture. Risks noted by our survey results as increasing the most in relative significance from 2020 to 2021 are primarily macroeconomic issues, as executives must deal with volatility in capital and labor markets, shifting governmental policies, border restrictions, and distribution challenges affecting supply chains. Social unrest and a risk of increased activism are also presenting more uncertainty in 2021.

The global business environment is viewed as riskier in 2021. When asked about their overall impressions of the risk environment in 2021, survey respondents collectively signaled that there would be an increase in the potential magnitude and severity of the risk environment for the short term relative to the prior year. Interestingly, when evaluating specific risks, respondents appear less concerned on a risk-by-risk basis, suggesting that they are leery of potentially unknown risks lurking on the horizon and beyond, making it more difficult to predict the environment in which their companies will operate. Given the continued occurrence of the unexpected, that is not surprising.

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We invite interested parties to read the executive summary of our survey results to learn more. Consistent with our studies in prior years, there are variations in views across industry groups and regions of the world. Likewise, there are different perspectives among directors and C-suite executives regarding the magnitude and severity of risks for 2021. This latter finding suggests the need for dialogue at a company’s highest levels to ensure there is a reasonable level of consensus on the critical enterprise risks facing the organisation.

As leaders look forward, the message is that economic concerns abound, and companies continue to cope with different forms of disruption — stemming largely from the pace of change in the digital economy.