Boston Consulting Group (BCG) has published a report that examines the current state of risk management within the business world and sets out the practical measures that companies can take to ‘move from aspiration to achievement’.
‘Mature Risk Management in Uncertain Times’ is based on a global survey of senior executives from 150 companies of various sizes across industries.
According to the report, while 71% of companies with mature risk management capabilities agree that these competencies help to mitigate the many potentially negative consequences of global crises, only 37% of organizations with less developed risk management say the same thing.
More than half of survey respondents at top-performing companies (58%) stated that the influence of the strategic risk management team at the center of the organization was a success factor during the recent periods of crises. Next in importance was a tie between embedding risk management into strategy and planning processes and data and analytics (both 46%). The latter finding supports the belief that the analysis of data collected by the organization, together with AI and generative AI, are essential elements of an advanced risk management capability.
Leaders and starters in risk management
The report categorizes companies with mature risk management practices already in place as ‘leaders’, and those with still some way to go as ‘starters’. And while starters can learn much from the path already taken by leaders, they must first focus on fixing the basics, such as securing buy-in from senior management to make risk management a priority. For leaders, the maturity of their risk management inevitably requires them to maintain more developed frameworks and processes. For example, while starters are still bogged down in internal matters, leaders are able to scan the external environment for emerging risks. Only 14% of starters cited rising regulatory scrutiny as a major challenge, compared with 44% of leaders. The lack of attention currently paid by starters to rapidly intensifying new risks, such as those relating to environmental, social, and governance (ESG) matters and AI, could have material consequences.
The survey results suggest that starters sense what needs to be done to emulate the success of leaders. The report’s authors argue that to reach this goal, companies should concentrate their attention on the following three actions:
- Make risk management a cornerstone in all key processes within the entire organization to ensure resilience.
- Combine a strong strategic risk management center with efficient and effective distributed operative risk management to secure a holistic understanding and appropriate mitigation of risks through a robust and consistent process.
- Enhance data analytics by focusing on the quantification of non-financial risks and using tools such as AI to make full use of available data.
