Sector News

New top emerging risk: Pace of change

July 25, 2019
Sustainability

Companies are, of course, concerned about their ability to keep up with a rapidly changing business landscape. But driving that, in part, are concerns about their own lagging and misconceived digitalization strategies.

So says Gartner in its latest Emerging Risks Monitor Report. In a second-quarter survey of 133 senior executives across industries and geographies, “pace of change” showed up as the top emerging risk.

The previous quarter’s top emerging risk, “accelerating privacy regulation,” has now become an established risk after ranking on four previous emerging risk reports.

Closely linked to the concern around pace of change are two operational risks: “lagging digitalization” and “digitalization misconceptions.” Those risks, according to Gartner experts, may be partly driving the top concern around pace of change and related threats from business model disruption.

“Among the top five emerging risks in the quarter’s survey, the linkages are clear,” said Matt Shinkman, managing vice president and risk practice leader in Gartner’s audit and risk practice. “Organizations are concerned with the pace of business change and vulnerability to disruption. [One] reason they may feel this risk so acutely is related concerns around their own operations, including digitalization strategies and an inadequate talent pipeline.”

Seven in ten (71%) of respondents indicated that pace of change was a key risk facing their organizations. It was a consistent concern across industries, with particularly high ratings in health care, insurance, and industrials, with at least 70% of executives in each of those industries indicating pace of change as a top emerging risk.

Driving the concern around pace of change are fears of being disrupted by nimbler competitors and a lack of clear avenues for growth. This risk can materialize through a rise in the number of new, disruptive competitors, a failure of the brand proposition to meet client needs or demands, and executives not responding to macro trends and changing consumer needs.

Risk leaders have a role to play. They should insert themselves early into the strategic planning process and work and collaborate with strategy and finance teams to encourage transformative steps and other positive risk taking, according to Gartner.

“Although the pace of business change is the top concern among organizations, we see a lack of tangible action among many organizations to address it,” said Shinkman. He noted that while 24% of organizations report no action to address the pace of change, only 28% are elevating that risk to the board.

Digitalization Concerns Increase Vulnerabilities
Other emerging risks that may be contributing to executives’ concerns around pace of change are related to digitalization:

  • Lagging Digitalization — Executives expressed concerns about inadequate digital budgets; a high failure rate for digitalization projects; their ability to scale projects; and project delays. Risk leaders can help drive change management initiatives related to digitalization, provide support to employees in a high-change environment, and help assess and manage expectations related to project success, Gartner says.
  • Digitalization Misconceptions — With two of three digital transformation projects failing to achieve their stated objectives, an increasing focus on digital projects can reveal enterprise weaknesses, according to Gartner. Progressive organizations favor clarifying strategic objectives early and taking an incremental approach to digitally driven business model transformation, the firm said. That helps the organization learn at scale, with limited risk.

By David McCann

Source: CFO

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