The current business environment is becoming increasingly difficult for many organizations, making risk mitigation more important than ever.
But how are businesses addressing the risks they face? What significance does innovation and new technology hold?
We surveyed more than 2,000 senior executives globally to discover their strategies for managing risks – and how innovation and new technologies can give them a competitive edge.
Every advance in technology creates new opportunities to innovate while simultaneously introducing new threats. While nearly half of executives believe their risk has increased, we should expect that number to climb as the pace of technological innovation accelerates. It's all about balancing risk and reward through strong governance frameworks as we look to reap the benefits of emerging technologies.
Generative AI is a great example. The promises of improved decisioning, productivity and hyperpersonalization of services must be balanced against the increased potential for fraud, IP exposure and data privacy. Without robust controls around proposed use cases, the consequences of generative AI can quickly overshadow the progress it will deliver.
Melissa Cullen, Banking and Decisions Solutions Division Executive, FIS
RISK AND REWARD
Business leaders say their organizations are exposed to more risk now than in the past, but they’re confident in their ability to overcome challenges and threats.
Given the current economic situation and difficult hiring markets around the world, financial and strategic risks are playing on leaders' minds. Business leaders are taking action by working with staff and consultants to implement new technology that can improve efficiency and mitigate risk.
of executives say they face more risk now than in the past
But making the wrong decisions can have a larger impact on an organization's reputation, operations and bottom line.
ARE EARLY ADOPTERS AT AN ADVANTAGE?
Early adopters of technology – those comfortable taking risks and among the first to introduce new technologies to their organizations – were more likely to agree that they face less risk now than in the past (20% versus the average 16%).
of executives at early adopting companies are confident that their organizations would be able to overcome and manage risks effectively, compared to 44% across all organizations
BUSINESSES ARE PROACTIVE
Regardless of their technology adoption strategy, executives are not resting on their laurels when it comes to addressing their most concerning risks.
One of the most common solutions for reducing risk is to assign existing staff to take responsibility. This is the favored approached to addressing almost all variations of risk across all organizations because it’s the fastest and most cost-effective option, although talent shortages may also be a deciding factor.
Risk is a wide-ranging concern. It’s also fast-changing and multifaceted. It includes financial risk, such as rising interest rates; operational risk, say from sophisticated and well-equipped cybercriminals; legal and regulatory risk from ever-changing rules; and climate risk, which is rapidly rising to the top of executives’ agendas. And no matter the sector, the impact of getting any of these wrong is huge.
Early adopters are more confident, and no wonder. Whether it’s next-generation AI tools or regulatory technology, deploying the latest technology is the best way to protect the business from high levels of risk. Couple that with internal ownership of risk and companies can be more confident even as they face a range of ever-changing challenges.
Tony Warren, Global Strategy Division Executive, Capital Markets, FIS
INNOVATION IS CRITICAL FOR MITIGATING RISK
Innovation – the conception, development and delivery of new products, services, processes and business models – plays a significant role in helping businesses address risk. Many executives look to innovation to help protect their organizations, gain a competitive edge and respond to the growing scrutiny of environmental, social and governance (ESG) activity.
of executives agree that innovation plays a role in managing the risks their organization faces
While some businesses are taking the necessary steps to achieve these goals, others find it difficult because they do not have the budget or talent needed to progress their plans at the desired pace or scale.
INNOVATION TAKES MANY FORMS
There is a wide range of areas in which organizations can mobilize innovation, each providing its own lever for driving change and reducing risk.
of organizations will build or adopt technology and system innovations to mitigate risk in the next 12 months
GROWING ESG INTEREST DRIVES INNOVATION
Companies are gaining greater awareness of the risks related to climate change and the evolving consumer sentiment toward ESG strategies.
of organizations have already been impacted by environmental and transitional risk, and 33% expect to be affected in the next 12 months
BUDGET IS A BLOCKER
Despite the importance of innovation, some firms are being held back.
of executives admit there is limited budget or financial resources for investing in innovation
But there are other concerns, as well. Even early adopters report above-average resistance among employees (53%) and management (48%).
Increasing pressure from stakeholders around ESG is guiding how many organizations prioritize risks and pursue innovation. With new reporting regulations being introduced this year by the Securities and Exchange Commission and International Financial Reporting Standards, companies will have to report on the financial impact of sustainability and climate-related risks and opportunities, which will likely spur investment in product, service and operating model innovation to deliver the most visible and tangible results.
Stephen Vitoria, Climate Risk Manager, FIS
Emerging technologies are one of the primary tools businesses can use to increase competitiveness and protection. Yet, making them work effectively requires resources and a certain level of skill.
Businesses must balance their return on investment and evaluate the associated costs and time needed to establish effectiveness alongside the potential benefits.
Embracing these emerging technologies could revolutionize the business world. The potential for enhanced efficiency, personalized experience and sustainability is immense. These technologies are also important levers for mitigating a variety of risks – making them critical to fostering trust and long-term growth.
John Avery, Vice President, FIS
How can you move past uncertainty and create an advantage with innovation? Start with these six steps:
Systematically assess the short- and long-term impact of macro risks on your business.
Identify which innovation strategies can mitigate the risks not only to your technology infrastructure, but also your business model, processes and customer experience.
Consider how the latest technologies can support your innovation strategy, the best way to fully leverage them and how partnering could help you achieve your goals faster.
Understand where resistance to innovation is coming from and implement educational or operational programs to clear roadblocks.
Determine where you need to augment internal knowledge and skills, and whether that requires training existing staff, hiring new employees or partnering for expertise, especially in relation to the evolving regulatory landscape.
Stay close to your customers. If you build their preferences into your strategy, both now and in the future, then your decisions will always be client-centric.
TO KEEP PACE
Economic and regulatory environments continue to change fast. But no matter the climate, innovation and the latest technologies will be key to remaining competitive and protecting your business. Action now is likely to pay dividends tomorrow.