Forecasting the Next Decade of Enterprise Risk Management
Cybersecurity breaches. New regulatory requirements. Super storms, wildfires, flooding and droughts. Disruptive events became the new normal in the last decade. Companies will continue to face these challenges — compounded by new risk trends — and the implications for their businesses over the next decade.
Your organization’s strategic objectives can provide you with a present and future vision. But what do you need to know to forecast what’s ahead for the market and the world?
To help you create a vision, Procipient® offers some possible future scenarios and frameworks for enterprise risk management (ERM). Risk managers can use these predictions as a starting point for developing risk mitigation strategies:
Proactive Financial Industry Risk Management Strategies Being Shared by Other Industries
Real-Time Risk Data as an Expectation
Automation of Risk Data Collection & Data Analysis
Machine Learning in Risk Identification
Managing the Risk of a Possible Economic Slow-down or Recession
What Risk Trends Should You Anticipate?
While you don’t know what the future holds, future thinking is crucial for risk management. The following are some of the challenges risk managers will face in the next decade.
More industries will utilize proactive risk management approach strategies that are already practiced by financial institutions. This is already common for healthcare and larger manufacturers. For instance, the stringent approach to cybersecurity risk management in the financial sector will continue to be adopted by other industries seeking protection against data breaches or ransomware attacks.
Real-time risk data will be a base expectation of your organization’s leaders in the C-suite and on the board. That means that risk management is playing, and will continue to play, an increasing role in strategic planning and decision-making. Boards and executives will not tolerate outdated or inaccurate risk data driving company strategy.
Automation will be used to collect and analyze specific data from disparate IT infrastructure systems into an ERM system. Automation is a cost-effective way to reduce dedicated risk management staff. This allows First Line of Defense (FLoD)business managers to dedicate less time to daily risk management activities while still maintaining visibility and awareness of risks. The FLoD can instead devote more time to gaining insights and understanding of those daily risk management activities.
Technology is an integral part of risk management solutions. Artificial intelligence or machine learning will provide benefits to ERM. The results will only be as good as the available risk management data. AI can be expensive. A typical fraud detection AI solution ranges from $100,000 to $300,000, even in a limited, well-defined, fairly-universal application. The expense may prevent some organizations from adopting AI. It will likely ease into risk management through focused areas of risk management, like fraud detection.
Finally, organizations will be looking to plan for a potential recession or economic slowdown. If you have risk data going back to 2007, look at how the last recession impacted your risk exposure. If you don’t have those records, keep track of your current ERM processes and controls. In the event of a future recession, you’ll have the necessary data and models to adjust accordingly. You’ll be able to review your risk exposure by adjusting specific variables associated with economic trouble, such as:
Reduced interest rates
Lower stock prices
Less income available to your customers and or B2B customers with lower profit margins
Impact of launching new products or services during this timeframe
Variability in profit margins and the availability of capital
Your organization’s strategy is strengthened by peering into and preparing for future possibilities. This requires that your risk managers anticipate industry trends and consider them in planning and implementing the enterprise risk management function.
The world is changing at a breakneck pace. Plans and procedures must be agile. Consider the lessons learned and best practices codified over the last decade. Build on them to be successful in the decade ahead.
Whatever the future holds, request a demo of Procipient® today to see how it can help you design a robust, future-proof enterprise risk management program.
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