In today's hyper-connected world -- dominated by mobile devices, social media and evolving expectations from society with increasingly divergent perspectives -- information spreads instantaneously. The convergence of mobile and social media is intensifying the impact of reputational risk for organisations and driving them to fundamentally rethink their approach to risk management and proactively address these accelerated risks.
At the core, the risk landscape is rapidly changing with daily headlines bringing new reminders that the future is here and it is not showing signs of slowing down. We have entered the fourth industrial revolution, enabled by technology and driven by constant disruption.
In the past, risk management was often an exercise implemented as a result of fear and avoidance, with organisations focused primarily on completing necessary, compliance-driven activities. This is changing with many leaders now viewing risk in terms of their potential to create value and drive performance.
As risk becomes more measurable and tangible, organisations will be better placed to determine an accurate upside value for risk and encourage the desired level of risk-taking behaviour in a bid to balance risk and reward. What we see is that risk onset, consequence and the entire nature of the risk discipline, is evolving.
The good news is that even the strategic conversation around risk is changing. It is no longer something to only fear, minimise and avoid, but an opportunity to determine an accurate upside value creation from risk and thereby encourage an appropriate level of risk-taking.
Risk and performance are tightly intertwined within social norms more than ever before. "New rules" require leaders to anticipate the unknown and recognise the opportunity to create value. Leaders of organisations are increasingly focusing on risks that threaten to disrupt the fundamental assumptions of their organisation's strategies.
Disruptions in the forms of emerging technologies, business model transformations and ecosystem changes will force executives to make significant strategic choices to drive organisational success.
Prioritising such risks has become increasingly crucial as these risks cannot be managed in typical organisational silos as they can destroy sources of value creation for the organisation yet, they also have the potential to form the basis of game-changing moves for an organisation, if handled well.
Disruptions in the forms of emerging technologies, business model transformations and ecosystem changes will force executives to make significant strategic choices to drive organisational success.
The forces driving risk trends can be summed up as:
· Risk management, which is built on a strong foundation of culture and evolves continuously to reflect and make an impact that matters.
· Outcomes through the application of analytics capabilities are helping leaders link risk to performance.
· Innovation as part of staying on the cutting edge of disruptive new business models that are driving the need for increased risk-taking.
· Shortfall -- which speaks to the inability to correlate performance with risk as a result of lack of appropriate tools.
· Vigilance as a proactive solution to the investment of significant resources into disruptive activities.
How do leaders use risk as a tool to create value and achieve higher levels of performance?
Organisations are now more connected to one another and "crowds" than ever before. They share data, technology and much more today than they did before and, as a result, they also share more risks.
Increasingly, they are managing risk in a manner that reflects this new reality -- transforming their risk processes through more open, collaborative approaches that rise to the challenges of a networked economy and working to identify, manage and reduce risk together.
The outlines of new opportunities and new challenges for all organisational leaders are already visible so how do leaders use risk as a tool to create value and achieve higher levels of performance?
Navin Sing is the managing director of Deloitte Risk Advisory Africa.