While controls are useful, risk leaders must focus on the impact of shocks at a business model level

The ability to detect and recognize sources and impacts of risk and disruption, whether due to technological innovation, shifts in societal values, or unintended consequences of pandemic disease control, may determine the commercial survival of an organisation, according to the newly published RIMS Executive Report.

The report covers the basics of emerging risks and business disruption, the drivers of disruption, and what role the strategic and ERM practitioner can have in better preparing and managing corporate disruption.

Risk leaders must identify the disruptive risks facing the organisation and make a timely decision about what to do about them, it recommends, with the ERM leader involved in these considerations. 

The challenge in today’s highly complex and interconnected digital world is the ability to maintain a well-honed risk detection radar. 

“As the velocity and consequence of disruption increases, risk leaders will need to upskill themselves on disruption awareness, strategy, business models and value propositions,” says the report.

”Risk leaders will also need to change their risk awareness questions after they reimagine or recalibrate the business model of the organisation under conditions of disruption.”

 In addition to emerging technological risks, there are an ever-growing list of global risks continues to loom large. The report cites the WEF Global Risks 2021 top 10 risks by impact, which are:

  • Climate action failure
  • Weapons of mass destruction
  • Biodiversity loss
  • Extreme weather
  • Water crisis
  • Information infrastructure breakdown
  • Natural disasters
  • Cyber attacks
  • Human-made environmental disasters
  • Infectious diseases

While controls are useful, the focus should be on understanding disruption at the business model level.

“Given the tremendous amount of disruption, change, and ever-increasing new risks, it only makes sense for ERM leaders to rethink their role and skill set,” the report states.

“Once the company is responding and creating their own future and wave of disruption, the risk leader can be a valuable partner in helping them identify and manage the risks associated with the plans, goals and initiatives, thereby improving resource allocation and increasing the chances of success.”

The report is authored by Dr Paul Walker, James J. Schiro/Zurich Chair in ERM, St. John’s University Peter J. Tobin College of Business; and Ward Ching, adjunct professor of Risk Management, University of Southern California Marshall Business School/Leventhal School of Accounting, and managing director at Aon.