60% of Irish businesses face challenges due to a lack of a coordinated approach to business risk.
A new study by PwC found that globally the top 10% of businesses realising benefits from strategic risk management can anticipate revenue growth greater than 10%.
Despite the risks to businesses and technology, the survey suggests that organisations may not be adapting fast enough. Risk-based decision-making needs to be enabled through integrated processes, workforce practices and systems. Six out of ten (60%) Irish respondents face challenges due to the lack of a coordinated approach to business risk (Global: 69%).
“Knowing your risks and tackling them head-on can make the difference between companies that grow and those that don’t”
In response, the survey found that roughly two-thirds of Irish businesses are increasing their spend on risk management workforce practices and capabilities, but less than their global counterparts (75%). This includes the addition of technology and digital capabilities to the risk function, reorganising the structure of risk functions and redefining the balance of resources.
Is governance benefiting you?
However, just a fifth (21%) of Irish risk leaders are currently realising benefits from a governance, risk and compliance system (Global:23%) that is holistic and integrated.
“With the aftermath of a pandemic and now a war, sanctions and economic and supply chain disturbances, the world is very different to what it was a year ago,” explained Richard Day, Risk Assurance Leader at PwC Ireland.
“So has the risk environment completely changed for organisations. Risk management capabilities need to adapt to support agility and to contribute proactive, robust and timely risk insights for business decision-making. Knowing your risks and tackling them head-on can make the difference between companies that grow and those that don’t.
“Based on the survey data and what global peers are doing, there is further scope for Irish businesses to invest in risk governance structures, coordinate business risk management practices and deploy technology over the medium-term to facilitate risk-informed decision-making.”
Risk management tech systems failure
Two-thirds (66%) of Irish respondents stated that they face significant management challenges due to technology systems that don’t work together (Global: 75%). Leveraging risk technology and data analytics is important to support real-time risk detection.
In response, over three-quarters (78%) of Irish risk leaders confirmed that they are increasing their spend on risk management technology (Global: 65%). Of this, 36% are increasing their spend by more than 11% (Global: 22%). This increased expenditure is primarily focused on data analytics and automation.
75% of Irish respondents stated that their risk functions lacked the required skill sets (Global: 70%).
However, there is more to be done by Irish businesses to ensure that they derive value from their significant medium-to-long-term investments in risk management technology. For example, just 36% of Irish risk leaders stated that they are only seeing tangible returns now from previous such spending (Global: 50%).
Engage risk early
Business leaders said it’s tough to keep up with the pace of change. With the help of technology, strategic decisions need to be revisited frequently. 75% of Irish business leaders reported that keeping up with the speed of digital and other transformations is a significant challenge to managing risk (Global: 79%).
Positively, 85% of Irish respondents were confident their risk functions could increase organisational resilience (Global: 91%). However, less than four out of ten (39%) business leaders confirmed that they are reaping the benefits of consulting risk professionals early in their transformation programs – with opportunity for earlier engagement.
“The organisations that have stood out from the pack in the past two years have not just managed risks, they’ve taken on risks, with confidence,” said Andy Banks, Risk Assurance Partner, PwC Ireland.
“These organisations have an agility advantage. They have the right resources engaged in making risk-informed decisions at the right time. Good analysis and modeling is a key component of proactive risk management, as is including risk management capabilities at the start of new projects and other strategic initiatives. These organisations are reaping the benefits of consulting with risk professionals early in their programmes.”
ESG: Investing in risk culture
Just over half (54%) of Irish risk leaders confirmed that they are investing in risk culture including considering behavioural risk (Global: 56%). Only a fifth (21%) reported that they are now realising the benefits of resetting their organisation’s risk appetite (Global: 22%).
For the top risks facing an organisation including ESG, risk management capabilities should go beyond the traditional risk analysis. Risk owners need to understand the interdependencies between the risks impacting the organisation and provide clarity on what is an appropriate risk appetite for the organisation. Having an appropriate risk culture is a key enabler to this.
Fiona Gaskin, ESG Risk Leader, PwC Ireland, concluded: “One of the biggest risks of our generation is climate change. This is often a multi-facted risk which can amplify other risks with the impacts far reaching. For example, it can quickly pose huge operational, financial and reputational risk.
“As such an organisation’s risk appetite and risk culture need to be sufficiently developed to identify climate change risks and opportunities and take the required action to embed a strategy setting the journey towards net zero. Not only will an organisation’s future existence depend on it but so will its reputation.”