Risk management is becoming more complex and challenging with the pace of risk transformation escalating, according to KPMG International’s new Future of Risk report.
The report is based on a global survey, which polled 400 executives in February and March 2024. This found that:
- 61% of executives expect to see a significant increase in the level of risk they will be responsible for in the next three to five years.
- The majority (90%) of businesses have increased their pace of risk transformation in order to manage risk.
- 68% of respondents believe that integration and interconnection of risk management systems, domains, and processes significantly enhanced the effectiveness of risk-related decision-making.
- AI and generative AI are identified as the most popular types of technology for managing additional risk responsibilities in the next three to five years.
The research found that risk management professionals are aware of the need to address challenges presented by a rapidly changing geopolitical and financial landscape. In fact, risk management professionals’ number one focus in the next one to three years is to proactively adapt to new risk types such as AI, geopolitical, reputation, ESG (environmental, social, and governance), IT, and cyber risk. Interestingly, the second-biggest priority is to leverage advanced analytics and AI for risk management. In fact, 41% of executives expect to spend more than half of their risk management budget on technology in the next 12 months, compared with just 28% in the previous year.
Integration and collaboration are priorities
Survey respondents recognize the need for collaboration between the risk function and broader strategic, operational, and financial functions of a business. Of those surveyed, 68% believe that integration and interconnection of risk management systems, domains, and processes had a significant positive impact on the effectiveness of risk-related decision-making. However, only 46% of respondents rate the current level of collaboration between risk domains as adequate.
In addition, a majority of CEOs and COOs (66%) and CROs and risk managers (57%) believe that cross-functional task forces, collaboration, and communication are essential for better understanding the likelihood and impact of large-scale events and developing greater resilience and agility.
Risk as a business enabler
This report makes clear the need for organizations to fundamentally alter their approach by embracing risk as an enabler and an asset that drives stakeholder value. As the survey shows, executives are already aware of the scale of transformation required and are taking steps to address this.
