Want to survive the technological revolution? Be an adapter
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Adapters are two-to-three times more likely than non-adapters to express confidence in their risk management program's ability to effectively manage risk from new technologies such as artificial intelligence (AI) and the Internet of Things (IoT).
They're also more likely to expect revenue growth. These organizations outperform less effective ones in several key areas. One is their level of influence over decision-making about innovation, including implementing new technologies to develop new products (57 percent versus 18 percent of non-adapters). Another is that their risk management function brings significant value (58 percent versus 18 percent).
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The firm surveyed more than 1,500 senior risk executives at organizations in 76 countries from October 2017 to December 2017. More than half of the respondents (60 percent) manage innovation risk "very effectively" or "somewhat effectively," a portion of the survey population the study labels as "adapters."As technological innovation continues to revolutionize business, organizations are grappling with new risks and unchartered challenges. The key to succeeding in this unstable environment is to be an adapter, according to a new study by consulting firm PwC.
Organizations are embracing the potential of emerging technologies such as big data, AI, and IoT, but risk management is often overlooked during periods of innovation, said Jason Pett, leader of PwC's US Risk Assurance practice. The adapters are the exception, Pett said, because they're tackling risk differently and are more likely to succeed in today's quickly evolving business environment.
The PwC report outlined five distinctions that separate adapters and non-adapters. One is that adapters engage early in the "innovation cycle." They are twice as likely as non-adapters to advise on innovative activities before the planning stage, according to the research.
Another is that they use multiple actions to address their risk exposure from new initiatives. Adapters more often use four or more actions -- ranging from revisiting objectives and strategy to sharing the risk -- than their less-effective peers.
Third, adapters frequently adjust their risk appetite and tolerance. They do this most often when creating new products outside their core offerings and implementing new technologies.
In addition, adapters harness new skills, competencies, and tools to support innovation. While 58 percent of adapters report that they are bolstering their risk management capabilities by adding new skills, just 39 percent of non-adapters plan to do this.
Finally, adapters monitor and assess the effectiveness of risk management in multiple ways. More than half (51 percent) of them use external parties to assess their risk management capabilities, while only 27 percent of non-adapters are monitoring their effectiveness in this way.
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Organizations need to understand that risk management and innovation go hand-in-hand, said Brian Schwartz, US governance, risk, and compliance enablement solutions leader at PwC. A keen awareness of the necessary actions to address both known and unanticipated risks that accompany innovation can enable risk executives to succeed in today's fast-changing environment, he said.
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