Topics:   Risk Management

Topics:   Risk Management

February 9, 2022

The Top Risks for the Next Decade: A Global Perspective

February 9, 2022

The latest global survey from Protiviti and NC State University’s Enterprise Risk Management Initiative found that the rapid speed of disruptive innovation, the threat of substitute products and services, and the ease of entrance of new competitors are all top risks looking out 10 years. Combined with other risks related to talent, the workplace, organizational culture, and the economy, these risks portend a disruptive decade ahead.

Our survey captures insights from 1,453 C-level executives and directors across multiple industries on macroeconomic, strategic, and operational risks. Alongside looking at the most pressing risks for 2022, the survey also looks at the 10-year horizon to 2031.

Conducted online in September and October 2021, the survey results highlight a disruptive risk landscape over the next decade. The highest-ranked global risk themes, in order of priority, include:

  1. Adopted digital technologies may require significant, frequent efforts to upskill and reskill employees.
  2. Succession challenges and an inability to attract and retain top talent may limit operations.
  3. The rapid speed of disruptive innovations enabled by new technologies and other market forces may require significant changes to the business model.
  4. Substitute products and services may affect the viability of the current business model and strategy.
  5. Economic conditions may significantly restrict the organization’s growth opportunities.
  6. The ease of entrance of new competitors or other significant changes in the competitive environment may threaten market share.
  7. Regulatory changes and scrutiny may affect how products or services are produced and delivered.
  8. Resistance to change may restrict the organization’s ability to pivot and adapt.
  9. Changes in the overall work environment (e.g., shifts to a hybrid environment, evolving labor markets, changes in the nature of work) may lead to challenges in sustaining organizational culture and operations.
  10. There may be an inability to utilize sufficiently advanced data analytics to achieve market intelligence.

Key Survey Takeaways for the Long Term

Looking in more detail at the survey results, we see several key themes (all of which come from our survey’s executive summary):

Longer-term priorities are shifting. Looking out over the next 10 years, our survey reported important shifts in the risks companies face across the globe. Four risks dropped out from last year’s top 10 list—risks associated with data privacy, sustaining customer loyalty, cybersecurity, and competition with “born-digital” players. New to the top 10 are concerns over the economy, new competitors’ ease of entrance, resistance to change, and the effect of changes in the overall work environment on sustaining organizational culture and conducting operations. There’s also evidence of shifting priorities within the top 10 risks, the most notable being regulatory concerns, which dropped from the second-ranked risk last year to seventh overall in this year’s survey.

People and culture are a long-term priority. The number-two risk overall for the next decade (as well as for 2022) pertains to succession challenges and the ability to attract and retain top talent in a tightening market. Organizational culture is also a long-term concern. There are several important themes related to people and culture for the coming decade:

  • The future of work will continue to be a defining business challenge. Both this year and last year, our survey results have the future of work as the fourth-ranked issue looking out 12 months and as the top risk for the next decade. The adoption of artificial intelligence, automation in all its forms, and other digital advances are expected to displace, as well as create, millions of job functions. Companies will need to upskill and reskill existing employees to fulfill the value proposition of these technological investments.
  • Workplace evolution is creating uncertainty and the need for agility. The pandemic has accelerated trends that were already underway—specifically, trends relating to remote work, e-commerce, and automation. These trends have empowered many employees by giving them a voice and choice as to where and when they work, leading to hybrid work environments for many companies. No one knows for sure what the post-pandemic norm will look like, and the number of companies implementing permanent work-from-anywhere policies continues to grow. Also, there’s uncertainty about what these changes’ impact will be on sustaining organizational culture and the way business is done. This uncertainty is the ninth-ranked global risk concern looking out 10 years.
  • Resistance to change has emerged as a long-term issue. As the eighth-ranked risk for the next decade, concerns about resistance to change present a conundrum of sorts. This risk calls to mind the importance of preparing for the future by inculcating a trust-based, diverse, and inclusive culture to enhance organizational preparedness, agility, and decisiveness. It points to the importance of scenario analyses, early warning systems, response plans, and innovative cultures that enable early movers to act on market trends that executives and directors consider relevant. Preparing the organization to pivot in the face of the unexpected can break down the barriers of resistance so that the organization embraces rather than fights change. This requires a higher level of strategic-thinking skills and relentless communication from the top.
  • Climate change concerns remain primarily isolated to industries heavily reliant on fossil fuels. Overall, climate change concerns represented one of the five risks with the greatest increase in severity between years, an increase of 16 percent. Among oil, gas, and power companies generating energy using fossil fuels, climate concerns rank as a top risk. Respondents representing companies in other industry groups don’t perceive significant alterations in their strategy and business model in response to climate change as a long-term concern. In time, investor expectations, customer preferences, regulatory requirements, and other market developments could change that perception. A lack of focus on climate matters could also pose additional talent retention challenges, especially with respect to younger generations. 

Economic uncertainty has emerged as a top long-term concern. It’s significant that survey respondents are expressing concern about economic headwinds over the long term (concerns over the economy rank fifth overall for both 2031 and 2022). Central-bank monetary and interest rate policies, the specter of structural inflation, the duration of time for supply chains to recover, the performance of the Chinese and other large economies, the effects of ballooning government deficits, and growing geopolitical tensions may be interrelated contributing factors to these longer-term concerns. 

Reliable market intelligence will separate winners and losers. Another top risk is the inability to use sufficiently advanced data analytics and “big data” to achieve market intelligence that will lead to increased productivity and efficiency and will drive focused innovation and digital investments. Respondents ranked this risk eighth for 2022 and 10th for the next decade. In rapidly changing markets, effective, ongoing analysis of data wins—particularly with respect to changing customer preferences.

Regulatory scrutiny remains a long-term global concern. Regulatory scrutiny affecting how processes are designed and how products or services are produced or delivered is more of a long-term risk, ranked seventh overall for the next decade. However, interestingly, it’s not a top 10 risk looking out 12 months—the first time this risk has not appeared in the top 10 since we began this annual survey a decade ago. This may suggest that respondents see gridlock and competing public sector priorities as mitigating the regulatory changes affecting their business in the near term. But longer term, they see this as an issue. For example, world leaders recently endorsed an overhaul of international tax rules that would impose a new global minimum tax of 15 percent on business profits to curb corporations’ efforts to shift profits to overseas tax havens.

A Long-Term View Is Vital to Sustaining Relevance

Seven of the top 15 risks over the next decade are not in the top 15 list for 2022. With a disruptive decade ahead, organizations embracing the long view with a trust-based culture, effective use of data analytics, and the ability to pivot at the speed of change are more likely to sustain their relevance. A longer-term perspective helps leaders “reality test” their assumptions about markets and the business environment so that they’re more prepared for surprises, as well as more decisive and agile in making timely adjustments to the strategy and business model.

The board of directors should consider the above risks in evaluating the company’s long-term strategic outlook in the context of its operations and markets. If management hasn’t identified these issues in the strategy-setting process, directors should consider their relevance to the company’s business and ask why not.

Jim DeLoach is managing director of Protiviti. DeLoach is the author of several books and a monthly contributor to NACD BoardTalk.

The Top Risks for the Next Decade: A Global Perspective

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