What's the biggest corporate risk? Failing to keep up with companies that are 'born digital'
Boards and C-suite leaders worldwide are concerned about the ability of their companies to transform operations and infrastructure so that they can compete with organizations that are “born digital,” according to a new report from consulting firm Protiviti and North Carolina State University Poole College of Management.
The researchers surveyed 825 board members and executives worldwide in the fall of 2018, and the results showed a significant increase in digital readiness concerns, which jumped from the number 10 position in 2018 to number one in 2019.
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“This jump provides evidence that digital agility and scalability are top-of-mind for businesses,” the report said. “Traditional companies are struggling to compete with newer digital players that can operate more efficiently, are innovative at their core, digitize and deliver new products and services, enhance the customer experience, and operate with agile business models.”
The report, Executive Perspectives on Top Risks for 2019, presented a list of the top 10 risks for 2019 based on survey responses.
In addition to concerns about digital readiness — which topped the lis — organizations are concerned with succession challenges and ability to attract and retain top talent; regulatory changes and scrutiny; cyber threats; resistance to change operations; rapid speed of disruptive innovations and new technologies; privacy/identity management and information security; the inability to use analytics and big data; the organization’s culture not sufficiently encouraging timely identification and escalation of risk issues; and sustaining customer loyalty and retention.
Looking ahead, digital disruption is a main driver of risk affecting uncertainty over business model viability, customer preferences, the competitive landscape, workplace dynamics, competition for talent and regulatory demands, said Patrick Scott, an executive vice president with Protiviti.
Organizations need to align their culture, people, processes, and intelligence gathering to embrace the rapidly changing business environment, Scott said.
Survey respondents indicated that the global business environment will be somewhat riskier in 2019 compared with previous years. The survey results also suggest that organizations are likely to increase their investment in strengthening risk identification and management efforts over the next 12 months relative to the prior year.
The perceived increase in the magnitude and severity of risks in today’s fast-changing business landscape should prompt boards of directors and senior executives to closely scrutinize the approaches they are taking in order to proactively address emerging risks, added Mark Beasley, professor of enterprise risk management and director of North Carolina State’s enterprise risk management Initiative.
Also: Digital transformation in 2019: Lessons learned the hard way
“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,” Beasley said.
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