PwC sees increasing risk management challenges

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Top executives struggle to navigate an ever-expanding array of risks as soaring inflation, supply chain constraints and war in Ukraine add to earlier worries about cybersecurity, ransomware and rapid technological change.

A recent investigation from PricewaterhouseCoopers found that 79% of 3,584 business and risk, audit and compliance leaders surveyed in February and March said that keeping pace with digital and other transformations presents a significant challenge.

“We found that some of the key risks to revenue growth are overall market macro risks, business and operating models, and changes to business operating models,” said Elizabeth McNichol, head of enterprise technology. of PwC’s Cyber, Risk & Regulatory practice. “Of course, cybersecurity and information management pose significant risks.”

The PricewaterhouseCoopers LLP building is in the financial district of Toronto, Ontario, Canada, Wednesday July 18, 2012. Photographer: Brent Lewin/Bloomberg

Brent Lewin/Bloomberg

Businesses are relying more on risk management technology, with 72% planning to increase their spending on technology to support risk detection and management. The survey found that 39% of business leaders surveyed said they made better decisions and achieved lasting results by consulting risk professionals early.

“Including risk management capabilities at the start of new projects or other strategic initiatives is something that many of our respondents felt was absolutely essential,” McNichol said. “They are able to make better decisions because of it. They are able to achieve more sustained results. Essentially, what they do is embed risk into the culture of the organization and make everyone a risk-aware professional.

Diversity has also become more important, with 70% of respondents saying they prioritize diversity in their risk management teams.

“The overall goal here is that you need to get a panoramic view of risk,” McNichol said. “It really is a 360 degree view of risk. The way I think of it as a head on a pivot so I can see what’s coming from all angles. What is essential to being able to achieve this panoramic view is a diverse team that will bring diversity of thought. You’ll be better able to get this comprehensive view of the risks your organization faces if you come to the table with a team that has diverse viewpoints.

While 38% of respondents indicated that their risk management function does not actively seek external information to assess and monitor risk, accountants and auditors can play an important role in the risk management process.

“If I put on my auditor hat, not only from a financial point of view, but also from an operational point of view, including operational auditing, I think what I would be looking for in terms of auditing is the risk function really integrated into the life cycle of a major project or a strategic initiative? McNichol said. “For example, in an ERP transformation or a technology-enabled business transformation, is there a risk-driven workflow, not just risk-driven in the program itself? same ? Am I thinking about any new risks that may exist because of this transformation I am going through and how will I begin to prepare for these new risks? »

Adjustments are needed to risk management, with 22% of survey respondents indicating they benefit from setting or resetting their risk appetite and risk thresholds, while 56% are investing in risk culture and considering behavioral risk in 2022. Despite concerns, 47% of respondents said they were very confident in their risk function’s ability to create a more risk-aware culture.

“The key to remember is that panoramic view,” McNichol said. “It’s about having the right team integrated into the strategic initiatives that the organization has underway. Whether it’s transformative initiatives like an ERP implementation or strategy-related projects, it’s essential that a risk management team be involved, and then it’s also important to increase the Overall risk IQ of the organization to create more risk-aware professionals. .”

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