The New Reality of Risk

Posted by

2016 has been a year of significant change; a year in which a sky full of hobbyist drones has become the norm; a year that has witnessed a new breed of terrorism that has shaken the world’s strongest governments; a year in which corporate governance scandals splash time and time again across the front-page news.

We continue to see a significant increase in the frequency of unpredictable external threats, and organizations are weathering the aftermath from incidents of corruption and non-compliance scandals. Even if we managed to learn from these developments quickly, today’s age of social media, with its fast-paced aggregation and reporting of facts and experiences, makes it feel like we are always playing catch-up. It is only by stepping back to view this New Reality in its entirety, that the business and leadership learnings become clear.

 

The Three Top Concerns for Leaders Around the World

There are three key trends that are capturing the attention of CEOs and government leaders, and fundamentally changing the way we live and do business – the introduction of left field disruptions, the risks and opportunities of global business ecosystems, and the rise of the digital universe.

Left field Disruption

In a recent survey of 25,000 plus CXOs conducted by a large public company, CEOs have come out with one common concern; “disruption from the left field.” Left field disruptions are the competitive threats that come from nowhere – they are the things that organizations did not predict or expect. Uber is a perfect example; in less than five years, Uber is now disrupting automotive, auto rental, transportation and even logistics industries. We also live in the era of left field cyberattacks, the rise of ISIS, the precipitous drop in oil prices. These left field disruptions are precisely what are keeping leaders up at night.

Risks and Opportunities of Global Business Ecosystems

Another topic that is top of mind for government leaders, boardrooms and CEOs is how to fully leverage the opportunities that exist in today’s global business ecosystems of partners, suppliers, and freelancers. McKinsey predicts that over $300 billion dollars’ worth of work will be freelanced in less than one decade. As our organizations go global and become more freelanced and outsourced, the question becomes this: how do we ensure that governance, risk management and compliance touches not just our employees, but extends across and embraces this entire ecosystem of partners and suppliers globally? In today’s global world, we are only as strong as our weakest link. Regulators are stepping up their focus on understanding an organization’s reliance on its networks of suppliers and partners, as well as the risks and vulnerabilities associated with global business ecosystems.

Rise of the Digital Universe

The other item that is top of mind for world leaders is how to harness the rise of the digital universe. We are living in exciting times, in an era where everything is being digitized and connected in the blink of an eye and at an unnerving pace. Nike recently announced their self-tying shoes with Internet of Things (IoT) sensors. Robots and drones are going to be the future for national defense and the new normal for logistics and manufacturing operations. Driverless cars are fast becoming a reality. IoT is connecting billions of devices. As new types of diverse data sources emerge, we have to know how to absorb that data and make sense of it.

The Power of Technology

Technology today seemingly has no limits. It is surprising to many just how much data is being generated at our very fingertips. For example, fitness wearables can collect datathat could one day revolutionize the pharmaceutical industry. Analytics and big data can equip organizations and governments as they collect vast amounts of information, discover patterns and correlations, and understand behavior at scale. This may also be the key to mitigating today’s risks proactively, rather than the retroactive approach we have seen agencies and organizations put to practice in the past few years. Just imagine if federal agencies could design systems for this very purpose, with privacy in mind from the start, running behavior analytics to identify 1 billion people with the confidence that it does not pose a threat to our security. From there, agencies could focus their efforts on the other 6 billion people, and continue to sort through to find the bad actors. This system may seem radical, but when you consider that proactive checks like these already exist (i.e., TSA’s Precheck program), it becomes an increasingly logical option for the world as we know it today. At the moment, this is not happening. We are reactively firefighting in the dark; going after the bad actors when it is already too late. What we need to do, instead, is to proactively solve the problem by bringing in light, transparent, and sophisticated analytics. What we need to do is to push ourselves to anticipate challenges and implement effective solutions for risks that lie ahead; we need to make this our mission for the months and years ahead.

Looking Ahead

We are certainly on the brink of a new reality, living in a world of left field disruptions, global business ecosystems, and the rise of the digital universe. Leadership, no doubt, has an obligation to give this new reality special attention; to find new and improved ways of adapting, planning, and executing. Yes, there is a need, and expectation, to understand both the sides of the equation – the risks and the opportunities. We also need to avoid getting caught up in fear and panic due to the news and the headlines we read each morning.

While there are new risks cropping up all around us, for a business, it is essential that opportunities are identified from these risks. So, what kind of leadership can help lead us towards advancement within this new reality? Leaders, whether they are at the wheel of a technology company, a government agency, or a product reseller, must rethink their operating methods, and identify proactive steps that bring about transparency and opportunity in a world of risks. Leaders must take on the task of identifying and understanding risks, and at the same time not be burdened by fear – fear that cripples evolution and innovation. While the world continues to change right before our very eyes, our collective mission must be on strategies and solutions that help open new doors, and continue to break down barriers and boundaries.

Leave a Reply

Your email address will not be published. Required fields are marked *