Looking to the year ahead, boards and C-suite leaders across the globe are most concerned about their company’s ability to transform its operations and infrastructure to successfully compete with organizations that are “born digital,” new research from global consulting firm Protiviti finds.
Succession challenges, followed by heightened regulatory change and scrutiny, rounded out the top three concerns, according to the survey, conducted by in collaboration with NC State’s Poole College of Management‘s Enterprise Risk Management (ERM) Initiative.
The report, Executive Perspectives on Top Risks for 2019, assesses the concerns of 825 board members and executives globally across a variety of industries. This year’s results show a significant increase in digital readiness concerns, jumping from the number 10 position in 2018 to number one in 2019.
This jump provides evidence that digital agility and scalability are top-of-mind for businesses
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 risk of succession challenges and the ability to attract and retain talent moved to number two, triggered by a tightening labor market and an increasing need for specialized digital knowledge and subject-matter expertise. Regulatory changes and heightened scrutiny continue to represent a major source of uncertainty, while concerns about economic conditions fell out of the top 10 list of risks for the first time in the seven years during which the research has been conducted.
“Looking forward, digital disruption is a main driver of risk impacting uncertainty over business model viability, customer preferences, the competitive landscape, workplace dynamics, the war for talent and even regulatory demands,” said Patrick Scott, an executive vice president with Protiviti, in a news release. “Clearly, organizations must align their culture, people, processes and intelligence gathering to embrace this rapidly changing business environment.”
“Whether covert or overt, resistance to necessary change—spawned by disruptive innovations that alter business fundamentals—can be lethal,” said Jim DeLoach, a Protiviti managing director and member of the research team, in the release. “Organizations must be willing and able to quickly make necessary adjustments to their business models and core operations. Strategic error in the digital economy can result in the ultimate price, if a company continues to play a losing hand in the marketplace.”
The Top 10 Risks for 2019
Survey respondents were asked to rate 30 risk issues. Following are the top 10 risks identified in the “Executive Perspectives on Top Risks for 2019” report:
- Existing operations meeting performance expectations, competing against “born digital” firms
- Succession challenges and ability to attract and retain top talent
- Regulatory changes and regulatory scrutiny
- Cyber threats
- Resistance to change operations
- Rapid speed of disruptive innovations and new technologies
- Privacy/identity management and information security
- Inability to utilize analytics and big data
- Organization’s culture may not sufficiently encourage timely identification and escalation of risk issues
- Sustaining customer loyalty and retention
Survey respondents indicated that the global business environment is somewhat riskier in 2019 compared to previous years. The survey results also suggest that corporations are likely to increase investment in strengthening risk identification and management efforts over the next twelve months relative to the prior year.
“The perceived increase in the magnitude and severity of risks in today’s ever-changing landscape should prompt boards and senior executives to closely scrutinize the approaches to proactively address emerging risks,” said Dr. Mark Beasley, professor of Enterprise Risk Management and director of NC State’s ERM Initiative, in the release. “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.”
The 2019 Executive Perspectives on Top Risks survey was conducted in the fall of 2018, and respondents represent organizations across the globe in the public and private sectors. Sixty percent of respondents’ companies have annual revenues of $1 billion or more. The survey report provides detailed insights broken out by size and type of company, respondent role, industry and geographical region.