Enterprise Risk Management (Preview)

Chapter 1 – Risk Management Awareness 11 5) Resistance to change that restricts business model and operational adjustments – Resistance to change by employees is prevalent in many organizations. Establishing and nurturing a culture that is open to change is critical for organizational success. Leaders have concerns that resistance to change restricts their ability to make adjustments. 6) Cyber threats disrupting operations – Cybercrime and cyberterrorism affect indivi- dual organizations, but also public networks and financial systems. Organizations recognize that significant threats are associated with their reliance on technology. 7) Privacy and identity protection – Major data and privacy breaches damage the reputation of organizations. The Internet, cloud computing, mobile devices and the use of social media create additional sources of risk for data security and privacy. 8) Culture that may not encourage the timely escalation of risks – The willingness and ability of employees to report risks is tempered by organizational culture and leadership styles. Some employees are reluctant to report risks to senior management. 9) Customer loyalty and retention – Customer preferences evolve with respect to products and services, but also with methods of procurement and delivery. The Internet, digital marketing and e-commerce pose challenges to customer loyalty and retention. 10) Adoption of digital technologies – Digital technologies such as artificial intelligence and robotics create a competitive advantage for organizations able to operationalize them. Organizations unable to adopt these technologies will be at a significant disadvantage. The insurance firmAon also conducts a global risk management survey on an annual basis. The survey is meant to identify key risks, trends or challenges that organizations are facing. 5 The Aon Global Risk Management Survey, 2019 gathered responses from almost twenty-seven hundred participants, representing thirty-three industries and sixty countries. Table 1.2 outlines the top fifteen risks identified by the Aon survey of 2019. Many other risk identification and risk management surveys are conducted by various types of institutions and professional services firms. Most of these surveys can easily be found on the Internet. They include valuable information on the most significant risks impacting organizations from the perspective of senior executives, industry experts and academics. The rankings are based on the opinions of survey participants who rely on risk information available within their organization and their knowledge of what is commonly known as the global risk landscape , namely the external forces that create risks. Risk management professionals gain insightful information by examining these surveys. Table 1.2 – Top Fifteen Global Risks Based on the Aon Survey of 2019 1. Economic slowdown / slow recovery 2. Damage to reputation / brand 3. Accelerated rates of change in market factors 4. Business interruption 5. Increasing competition 6. Cyber attacks / data breach 7. Commodity price risk 8. Cash flow / liquidity risk 9. Failure to innovate / meet customer needs 10. Regulatory / legislative changes 11. Failure to attract or retain top talent 12. Distribution or supply chain failure 13. Capital availability / credit risk 14. Disruptive technologies 15. Political risk / uncertainties Source: Aon, Global Risk management Survey, 2019 . (Report accessible through: www.aon.com).