PwC Recommends Strengthening Risk Management

PricewaterhouseCoopers has issued a report outlining how organizations can strengthen their risk management techniques.

PwC recommends that organizations focus on four categories of strategic response: resilience, people, technology and next-generation risk analytics.

According to the report, organizational change and restructuring, talent shortages and greater technology risks are the key transformation-driven risks for 2013. To respond to these global market shifts, corporations are building new business models, tapping into digital channels, and expanding into new geographic markets, while rethinking how their supply chains and the location of their facilities fit into their globalization strategies.

Based on a survey of more than 800 executives and risk managers in businesses worldwide, PwC’s report noted that more than two-thirds of companies have undergone a major transformation in the past 18 months, and another 10 percent plan to do so over the next 18 to 24 months.

“Continued recessionary pressures, global financial shocks, increased taxation and excessive government austerity are top-of-mind risks for board members and executives because of the serious impact they can have on businesses,” said PwC US Risk Assurance practice leader Dean Simone in a statement. “Changes in business direction have also exposed companies to new risks, and the interplay of market and business transformation is creating complex risk linkages that can be fragile and difficult to predict. This complexity requires businesses to rethink their approach by taking a holistic, multifunctional view of managing risk.”

While some of 2012's global market risks are behind us, survey respondents remain concerned about global economic and political pressures. Organizational change and restructuring, talent shortages and greater technology risks are all key transformation-driven risks identified by PwC for 2013.

A major global economic downturn is again seen as the most serious risk over the next 18 months, and nearly two-thirds of PwC’s survey respondents cited such a downturn as being likely. PwC’s 16th Annual Global CEO Survey reflected this sentiment, with 81 percent of respondents being somewhat or extremely concerned about economic uncertainty, and nearly a third expressing worries about a US recession.

Executives who responded to the survey indicated they are most apprehensive about increased taxation in industrialized markets, which two-thirds considered a probable event with serious consequences. Similarly, about half of respondents said they view excessive government austerity measures as a powerful threat, particularly as more nations move to reduce their heavy debt burdens.

Nearly 60 percent of the executives polled said business transformation would make their companies more vulnerable to technology risks. The danger that major IT programs will fail to deliver expected benefits is the biggest specific risk cited by survey respondents.

More than 40 percent of the survey respondents said social media is likely to put them at risk in the next 18 months. Nearly half of the survey respondents indicated they are concerned that entering new geographies and markets will expose them to further risks, particularly regulatory compliance risks.

More than 62 percent of the survey respondents cited the risks arising from organizational change and restructuring as a key hazard of business transformation, since reorganizations can go wrong or cause unexpected consequences. Similarly, more than half of the respondents to the poll cited the failures of new strategies and business ventures as key risks.

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