Enterprise Risk Management (Preview)

10 Part 1 – Concepts and Methods The World Economic Forum (WEF) conducts an annual survey of global risks that can have significant negative consequences for several countries or industries within the next ten years. 2 The WEF survey conducted in 2020 includes analyses and responses from approximately eight hundred participants of diverse communities representing business, academic and public-sector organizations across the world. 3 Table 1.1 lists the most significant global risks identified in the WEF global risks survey report. The ERM Initiative of the Poole College of Management, North Carolina State University, conducts an annual survey of “executive perspectives on top risks” in partnership with the global consulting firm Protiviti. This survey examines macroeconomic risks, strategic risks and operational risks facing organizations. The Executive Perspectives on Top Risks for 2020 surveyed over one thousand board members and executives across a variety of industries and companies located around the world. Each respondent was asked to rate thirty individual risks. The top 10 risks can be summarized as follows: 4 1) Regulatory changes and heightened regulatory scrutiny – Organizations worry that regulations will affect the design and delivery of their products and services. They are concerned about how those changes might impact their business models, cost structures and competitiveness. This risk has been ranked as the top risk, many years in a row. 2) Economic conditions that may restrict growth opportunities – Economic conditions that may affect demand and growth in domestic and international markets include changes in monetary and fiscal policies, trade and tariff disputes, fluctuations in the price of commodities, and the political and economic stability of countries. 3) Succession and the ability to attract and retain talent – The need to maintain a competent workforce with the right blend of leadership, knowledge, skills and abilities is critical to organizational success. Organizations worry that they may not be able to build and sustain a competent workforce that will enable them to implement their strategies. 4) Ability to adopt a digital mindset and develop related capabilities – Disruptive trends associated with digital marketing and technologies are a threat to many organizations. Developing and maintaining an ability to adapt to new forms of competition from new entrants is a major challenge for incumbent organizations. Table 1.1 – Most Significant Global Risks According to the WEF Survey of 2020 Top 10 risks in terms of likelihood Top 10 risks in terms of impact 1. Extreme weather 2. Climate action failure 3. Natural disasters 4. Biodiversity loss 5. Human-made environmental disasters 6. Data fraud or theft 7. Cyberattacks 8. Water crises 9. Global governance failure 10. Asset bubbles 1. Climate action failure 2. Weapons of mass destruction 3. Biodiversity loss 4. Extreme weather 5. Water crises 6. Information infrastructure breakdown 7. Natural disasters 8. Cyberattacks 9. Human-made environmental disasters 10. Infectious diseases Source: World Economic Forum, Global Risks Report 2020 . (Report accessible through: www.weforum.org).