Top 12 Trends in Enterprise Risk Management to Look Out for 2023
Enterprise Risk Management (ERM) has stepped into the spotlight as businesses attempt to deal with the long-term repercussions of the COVID-19 pandemic, the possibility of a recession, and the quick rate of development.
Executives understand that stronger ERM programs are needed to compete in this new era. Companies must grapple with the interconnectedness of risks as part of the present risk environment.
According to Alla Valente, a senior analyst at Forrester Research, businesses are becoming ever more interconnected to one another as well as to the partners, vendors, and suppliers operating inside global markets.
The following are 12 security and risk management trends that are transforming the risk environment and impacting business continuity planning.
1. Workflows are combined in risk maturity frameworks
As vulnerabilities in the risk landscape become more interrelated, more businesses are taking into account a risk maturity framework, Valente noted. This method is similar to other software development frameworks, such as the capability maturity model. To achieve a mature level of risk management, it is necessary to handle both processes and technologies.
2. Technology stacks for ERM are extended to GRC
The scope of enterprise risk management has broadened beyond financial governance to include areas such as information technology, third-party interactions, and governance risk and compliance (GRC). To design and maintain policies, conduct risk assessments, analyze risk posture, detect regulatory compliance gaps, manage and respond to incidents, and automate the internal audit process, a comprehensive GRC platform can be a vital integration tier for all risk management activities.
3. ERM viewed as a strategic advantage
Since the outbreak of the COVID-19 pandemic, risk management has been seen by many businesses as a strategy to gain an advantage over the competition rather than merely a means of avoiding negative outcomes.
To better understand how risks might impede company strategy and limit income streams, Valente’s research team has been comparing and contrasting the approaches of traditional chief risk officers (CROs) who are hyper-focused on minimizing risk with those of so-called transformational CROs who see risk management as a competitive advantage.
4. Increased usage of risk appetite statements
The financial services sector developed risk appetite statements to enhance dialogue with staff, shareholders, and authorities. To increase the amount of available loans, a lender must be willing to assume some level of risk; nevertheless, if an excessive number of borrowers default on their obligations, the lender must have a system in place that will immediately take corrective action.
Implementing a successful risk appetite statement is difficult for businesses for a variety of reasons. Some CEOs worry that a badly phrased statement could be construed as sanctioning undesirable practices, while others worry that it could limit their capacity to pursue new possibilities.
5. Subject-matter expert panels speed up risk assessment and reaction
Putting together all the risk information is important, but experts are also needed to figure out what it all means. Enterprises are leveraging the GRC platform to build an informed network of subject matter experts for crucial projects. In the event of a cross-departmental problem, such as a security incident involving IT, legal, and HR, the relevant specialists can be immediately enlisted to evaluate the situation and choose the next course of action.
6. Increased availability of risk mitigation and measurement tool
Deloitte principal, Keri Calagna, noted that tools for actively evaluating and managing risks are improving. Internal and external risk sensing systems assist provide risk intelligence that recognizes trending and emerging threats.
In addition, Calagna said that businesses are increasingly turning to more integrated technologies that do the following: give a holistic perspective of risks across the organization; capture leading indicators to demonstrate how risk is evolving; promote accountability for the measures taken to mitigate risk; and provide real-time risk reporting to aid in management decision-making.
7. GRC and ESG meet
Connecting enterprise risk and environmental, social, and governance (ESG) agendas is another trend in corporate risk management. Calagna predicts that capabilities for scenario planning and assumption testing will continue to improve. Companies are also adopting simulations, war games, tabletops, and other interactive workshops to stimulate cross-functional thinking on risk and examine the impact of possible futures on corporate business planning and strategies.
8. CIOs facilitate C-level ERM buy-in
The COVID-19 epidemic and economic uncertainty are forcing companies to prioritize resilience above risk management. Businesses with well-established ERM plans that include all departments can change direction fast. CIOs must unite the company’s C-suite in order to implement effective risk and resilience strategies.
9. The importance of extreme weather threats increases
As crisis events like extreme weather get worse and happen more often, CEOs and boards will be asked to put in place risk management strategies to protect employees and assets. According to the most recent data available, weather-related disasters cost $145 billion in losses in 2021.
Mark Herrington, CEO of OnSolve, an AI event management platform, has predicted that by 2023, CEOs will need to be educated in risk mitigation in order to safeguard their companies’ assets, employees, and bottom lines from the increasingly common occurrence of extreme weather.
10. Making risk management and digital transformation complementary
According to PwC’s Digital Trust Insights 2022 poll, 75% of executives believe that their businesses are overly complex, particularly in terms of their technology, data, and operating environments. In order to streamline their risk management procedures, businesses are consequently implementing integrated governance, risk, and compliance (IGRC) programs at a faster rate.
IT is essential to IGRC as a facilitator and driver. Chief information officers and other IT leaders must collaborate with other management teams to identify risks, assess their impact, and develop mitigation strategies that are consistent with the organization’s risk appetite. An integrated governance model can help by coordinating the strategy, people, process, and technology goals along the entire value chain. To make sure that the risk element is incorporated into broader digital transformation strategies, this ERM trend is essential.
11. Cyber risk measurement
The need for risk quantification services within businesses has been on the rise, according to Everest Group’s IT Services practice director Kumar Avijit, who has been hearing this trend directly from C-suite executives. These services can include anything from customizing cybersecurity rules to figuring out how much a risk is worth in money through a thorough risk assessment process.
12. Contextualized and improved risk monitoring
Additionally, Avijit is noticing a rise in demand for risk management monitoring solutions that are customized for various personas, such as chief information officers, chief business managers, and chief information officers. This is a result of new risk management priorities and requirements being established by various leaders and business users. With drill-down views that show the right level of detail, these tools improve traditional risk management analytics.
The following are some examples of some of the evolving risk priorities for various roles:
- The goal of CEOs is to secure business transformation.
- CFOs seek to lower company risks and breach costs.
- The goal of COOs is to manage robust business operations.
- CIOs want security to be a key component of IT strategy.