There is no doubt that today’s organizations are operating in an increasingly uncertain environment – one in which there is an exponential rate of change driven by technology; where climate change, regulatory reform and global trade wars cast shadows over business strategy decision making; and where governance and risk management concerns threaten to take over day-to-day business.
In this volatile market, risk management governance leaders become ever more vital to the modern organization. Governance experts call for companies to lean on their skills, expertise and experience so that they may propose and implement innovative solutions.
But what challenges are these risk management governance leaders facing today? And how are they tackling operations in an environment that seems to never stand still?
The Governance Institute of Australia’s 2019 Risk Management Survey sought to answer these questions by surveying almost 500 risk managers and governance leaders to gain insights into the unique challenges facing organizations, both now and in the future. While aspects such as talent retention, economic shock, staff conduct and sustainability do weigh heavily on the minds of risk management governance leaders in Australia, there are five clear risk management concerns dominating the landscape over the next three to five years.
Where Australia’s risk management governance leaders feel most and least prepared
1 Regulatory or legislative change
Survey definition: The effect of royal commissions, direct regulatory intervention in the market and government policy changes.
It comes as no surprise that, in this era of increasingly complex global regulation, risk management governance leaders rate regulatory or legislative change as their top concern – though organizations do rate themselves as fairly prepared to tackle these changes, perhaps because this is not a new concern. When asked how effective their organization was in proactively identifying and managing its risks overall, respondents gave themselves a score of 7.27 out of 10.
2 Disruption and failure to innovate
Survey definition: The effects of technological disruption by startups, Amazon, Airbnb, Uber, Apple, etc.
The corporate environment can move slowly, and in a world where small companies can cause massive disruption to the market, risk management governance leaders are acutely aware of the risks brought on by a failure to maintain the speed of innovation. Australian risk management governance leaders are aware that there is a technology problem in their industries – they rate preparedness for disruption as the second-highest risk concern – but while they recognize it will be an ongoing concern, they are unsure how to address it.
3 Increased competition
Survey definition: The effect of new entrants, both local and international, posing a threat to your organization.
The threat of increased competition is not a uniquely Australian risk, especially as technology brings once far-flung markets within easy reach of anyone. It is, however, still among the top-five challenges facing risk management governance leaders in the country, with 12 percent of respondents to the Governance Institute’s survey rating increased competition as one of the top risks for the next three to five years. Australian organizations are no longer just facing domestic competition but are trying to mitigate the risks brought by competitors across Asia and beyond that may have lower operating costs or easier access to materials.
4 Cyber crime
Survey definition: The effect of cyberattacks and hacking, intellectual property theft, theft of customer data, malware and data privacy (storage of data and legal disclosure requirements).
Although Australian risk management governance leaders rated cyber crime as one of their top-five biggest concerns for the next three to five years, they do not feel prepared to tackle the issue, rating themselves only mildly ready to face hackers. Governance and compliance leaders are aware of the issue, and believe it will be an ongoing concern, but are still unsure exactly how to address it. Secure solutions to managing and storing the corporate record will be key to mitigating these risks in the future.
5 Damage to brand or reputation
Definition: The effect of poor public relations, marketing or social media, or market-facing gaffes that harm your organization’s standing in the market.
Unsurprisingly in the year that the Royal Commission into Misconduct in the Financial Services, Banking and Superannuation Industries handed down its findings – which were not very complimentary with respect to Australia’s financial services governance practices – the country’s risk management governance leaders are worried about how to handle damage to the organization’s brand or reputation. While the best way to mitigate this risk is to not do anything unethical or unsavory, those in charge of governance and compliance will want to ensure that oversight can be kept over all operations – from the smallest contract to the biggest remuneration package.
Risk management concerns can differ by sector
Interestingly, the Governance Institute’s risk management survey found some nuanced differences in risk management and preparedness when looking at the risks themselves by sector and by organizational revenue.
Regulatory risk management was ranked as the top achievement for finsec, healthcare and public sector organizations – unsurprising, given that those sectors are driven by increasingly complex regulatory environments. Those in the education sector felt that they were most prepared to handle risk management in staff conduct, while the professional services sector felt most comfortable managing risks centered around brand and reputation management.
When looking at the size of the company, it was regulatory risks that came out on top of the self-governed scoring system. However, organizations rated themselves second-best at managing different risks; as revenue size increases, governance professionals believe they are ready to handle risks of staff misconduct (less than AU$100 million), liability (less than AU$1 billion), and brand and reputational risk (more than AU$1 billion). It’s only in small companies with revenue of less than AU$1 million that regulatory risks come in second; Australia’s SMEs believe they are the most prepared to handle risks of staff misconduct.
Using technology to address risk management concerns for governance leaders
The best way to deal with these risk management concerns is, of course, to be prepared for all eventualities – and the best way to be prepared is to ensure your day-to-day entity management and legal operations are handled safely, securely and efficiently.
Entity management software, such as Diligent Entities, enables organizations to centralize and manage their corporate subsidiary data management to simplify entity governance throughout the organization. This, in turn, helps to improve compliance and mitigate the concerns of risk management governance leaders. By storing entity information, documents and organizational charts in a highly secure format, governance leaders can create a single source of truth for the corporate record.
Compliance calendars, reminders and automated workflows can help take the sting out of mounting regulatory and reporting pressures, with entity management software enabling governance leaders to get the right information to the right people at the right time in order to complete routine business processes.
To add another robust layer of governance risk management, Diligent Entities integrates seamlessly with Diligent Boards and a secure file-sharing platform to create the Governance Cloud, an all-in-one governance ecosystem that enables organizations to achieve best-in-class modern governance processes through the use of cloud-based technology.
Get in touch and request a demo to see how Diligent Entities and the Governance Cloud can help to mitigate risk management concerns for governance leaders.