Home » Risk Management » ERM - Enterprise Risk Management

5 ways to adapt your risk management strategy to innovation

A study of risk executives by PwC found that those who successfully adapt to and adopt innovative technologies do five things differently to the 'non adapters', including early adoption and harnessing new skills. The study, which surveyed more than 1,500 senior risk executives in 76 countries, looks at how risk executives go about achieving the appropriate risk-reward balance as they adopt and adapt to innovative technologies.

More than half – 60 per cent – of the risk executives polled manage innovation risk 'very effectively' or 'somewhat effectively' and this group – named the 'adapters' – became the focus of best practice in the research. The study concluded that the adapters (as opposed to their colleagues who were less effective in managing innovation risk – called the 'non adapters') make better decisions on which new innovative technologies to develop and get better value from their risk management function. Overall the study found the following tendencies among adapters compared to their peers:

  • adapters have more influence over decision-making about innovation including implementing new technologies to develop new products (57 per cent versus 18 per cent of non adapters);
  • adapters say their risk management function brings significant value (58 per cent versus 18 per cent of non adapters);
  • adapters are also two to three times more likely to express confidence in their risk management programme’s ability to effectively manage risk from new technologies including artificial intelligence and the Internet of Things than their less effective peers — and more likely to expect revenue growth.

Five factors that make you a better adapter

The survey also identified five factors that separate adapters and non adapters:

  1. They engage early and often across the innovation cycle. Adapters are twice as likely as non adapters to advise on innovative activities before the planning stage.
  2. They use multiple actions to address risk exposures to new initiatives. These include revisiting objectives and strategy, sharing the risk, adjusting risk appetite and postponing an activity to avoid assessed risk.
  3. They adjust risk appetite and tolerances with frequency for a range of innovative activities, most often when creating new products outside their core offerings and implementing new technologies.
  4. They harness new skills, new competencies and new tools to support innovation. While 58 per cent of adapters report that they are bolstering their risk management capabilities by adding new skill sets, just 39 per cent of non adapters plan to do this.
  5. They monitor and assess effectiveness of risk management in multiple ways: 51 per cent of adapters use external parties to assess their risk management capabilities, while only 27 per cent of non adapters are monitoring their effectiveness in this manner.

CTMfile take: The full report can be downloaded and is worth a read: Managing risks and enabling growth in the age of innovation


This item appears in the following sections:
Risk Management
ERM - Enterprise Risk Management

Also see

Comments

No comment yet, why not be the first?

Add a comment