Organizations are concerned about their ability to keep up with a rapidly changing business landscape, driven in part by concerns about their own organizations’ lagging and misconceived digitalization strategies, according to Gartner, Inc. (www.gartner.com).
In the second quarter of 2019, the research group surveyed 133 senior executives across industries and geographies, and the results showed that “pace of change” had emerged as the top emerging risk in the “2Q19 Emerging Risk Monitor” survey. Last quarter’s top emerging risk, “accelerating privacy regulation,” has now become an established risk after ranking on four previous emerging risk reports.
Closely linked to the concern around pace of change are two operational risks, including “lagging digitalization” and “digitalization misconceptions,” which Gartner experts said may be partly driving the top concern around pace of change and related threats from business model disruption.
“Among the top five emerging risks in the quarter’s survey, the linkages are clear,” said Matt Shinkman, managing vice president and risk practice leader in the Gartner audit and risk practice. “Organizations are concerned with the pace of business change and vulnerability to disruption. Part of the reason they may feel this risk so acutely is related concerns around their own operations, including digitalization strategies and an inadequate talent pipeline.”
Seventy-one percent of respondents indicated that pace of change was a key risk facing their organizations. This risk was a consistent concern across industries, with particularly high ratings in healthcare, insurance and industrials, with executives in these industries indicating pace of change as a top emerging risk with a frequency of 70% or higher.
The concern around pace of change is driven by fears of being disrupted by nimbler competitors and a lack of clear avenues for growth. This risk can materialize through a rise in the number of new, disruptive competitors, a failure of the brand proposition to meet client needs or demands and executives not responding to macro trends and changing consumer needs.
Risk leaders have a role to play in inserting themselves early in the strategic planning process and to work across function by collaborating with strategy and finance teams to encourage positive risk taking, such as transformative measures to the business.
“Although the pace of business change is the top concern among organizations, we see a lack of tangible action among many organizations to address it,” said Shinkman. “Twenty-four percent of organizations report no action to address the impact of the pace of change, while only 28% are elevating this risk to the board.”