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What are the top 5 emerging trends that will reshape your organisation’s future?
Identifying these new and unpredictable challenges that your organisation hasn't faced before is crucial for strategic planning and risk management, helping you to navigate a complex and unpredictable global landscape. These emerging challenges, often unprecedented and unpredictable, necessitate a readiness to adapt and innovate, the development of a risk aware culture, ensuring your organisation cannot only sustain growth but also capitalise on the opportunities presented by market and societal shifts.
Yet, how many organisations are truly prepared to adapt to and future-proof against these emerging changes? In my experience, not many! This is often due to a lack of advanced capabilities that can anticipate and tackle the unpredictable nature of emerging threats and opportunities. In a world where technology, regulations, and market dynamics evolve rapidly, traditional risk management methods fall short. The consequence? Many commercial and non-profit organisations risk being outpaced by more agile competitors, potentially missing out on critical opportunities for growth and innovation. As businesses like Kodak and Nokia learnt the hard way, this can be nearly fatal!
So at Aevitium LTD, we aim to provide you with a structured and systematic approach towards identifying and managing emerging risks. Such a framework is indispensable for your organisation intent on proactively identifying the top emerging developments poised to impact its operations, supported by a risk-aware culture. By implementing the strategic and operational management principles outlined in this guide, you can enhance your organisation’s resilience, stimulate innovation, and secure a competitive edge. This guide will equip you and your teams with the knowledge and skills to build a systemic approach to identify and manage emerging risks tailored to your organisation’s needs.
Table of content:
Executive Summary
Emerging risks, characterised by their novelty and unpredictability, arise from a multitude of sources including technological breakthroughs, regulatory shifts, environmental changes, and geopolitical dynamics. Traditional risk management methodologies, while foundational, are increasingly inadequate in addressing the complexities and velocities of these risks.
This article presents a detailed guide on designing an emerging risk framework supported by a fully embedded risk aware culture. Such framework is a critical tool for organisations aiming to navigate the uncertainties of the modern business landscape effectively. It underscores the necessity of such a framework, detailing a step-by-step approach for its effective implementation. From securing executive buy-in and establishing leadership to integrating the framework into organisational processes and continuously improving it, the guide provides actionable insights and practical strategies.
Moreover, through a series of illustrative case studies, the article showcases successful implementations across various industries, demonstrating the tangible benefits of adopting a proactive and structured approach to emerging risk management. These examples highlight how organisations can not only mitigate potential threats but also seize opportunities for innovation and strategic growth.
The need for an emerging risk framework is underscored by a critical observation: many organisations exhibit varying levels of maturity in identifying and managing those new risks, often underestimating their potential impact. This guide aims to bridge this gap, offering ambitious yet targeted solutions that drive value creation, optimise risk resources especially through effective horizon scanning , and foster a culture of effective risk-taking.
In essence, this article serves as an indispensable blueprint for leaders dedicated to steering their organisations towards resilience and success in an uncertain world. It encourages readers to take a proactive stance on emerging risks, engaging with a wide range of stakeholders to gather diverse perspectives and insights, thereby enhancing their preparedness and strategic agility.
For organisations ready to elevate their risk management capabilities, this guide offers a comprehensive pathway to developing and implementing such risk framework, positioning them to confidently face the challenges and opportunities of the 21st century.
It is not always easy to develop such tool without support. Aevitium LTD's structured risk advisory and consulting services can provide you with a robust support system to develop a risk strategy and emerging risk framework designed for you. We promote ownership of risk decisions and foster risk-aware culture through the tailored solutions we develop together.
Why do you Need an Emerging Risk Framework?
Navigating the uncertainties of emerging risks without a comprehensive framework is like sailing through uncharted waters without a compass. Such framework provides organisations with the tools and methodologies needed to systematically identify, assess, and respond to these risks. It helps businesses stay ahead of the curve by anticipating changes, adapting strategies accordingly, and mitigating potential threats before they materialise. Implementing such a framework is essential for fostering innovation, enhancing resilience, and securing a competitive advantage in today's rapidly changing world.
Here's a breakdown of the key reasons for having such a framework:
Systematic Identification of Risks
Identifying emerging risks involves having a structured process to detect and recognise new risks that could impact the organisation, leveraging horizon scanning for this purpose. In the absence of a systematic approach, emerging risks might go unnoticed until they have already caused significant damage. A framework ensures that risks are identified early, giving organisations more time to prepare and respond.
Comprehensive Risk Assessment
Strategic Response and Mitigation
Staying Ahead of the Curve
Fostering Innovation
Enhancing Organisational Resilience
Securing Competitive Advantage
Case Studies of Successful Implementation
Financial Services – Cybersecurity Risk
Situation: A leading global bank identified the emerging risk of cyber-threats, that is threats to its online information and systems, particularly as digital banking services expanded. Recognising the potential for significant financial and reputational damage, the bank sought to proactively address this challenge.
Action: The bank implemented a comprehensive cybersecurity risk framework that included advanced threat detection systems, regular security assessments, and employee training programs on cybersecurity best practices. They also established a rapid response team to address any security breaches immediately.
Outcome: By prioritising cybersecurity, the bank not only protected its assets and customer data but also strengthened customer trust in its digital services. This proactive stance allowed it to outperform competitors in digital banking security and resilience.
Retail - E-Commerce and Supply Chain Disruption
Healthcare - Tele-health Adoption
Energy Sector - Transition to Renewables
What is it?
Emerging risks are new or changing threats that cause a lot of unpredictability and could have a big effect on many areas, like operations, technology, the environment, the economy, society, rules, and regulations. Cybersecurity threats, AI and IoT flaws, climate change, biodiversity loss, economic instability, social inequality, geopolitical tensions, pandemics, data privacy issues, supply chain disruptions, and technology failures are some of these risks. By there very nature, emerging risks are complicated and hard to predict.
Here is an analytical breakdown of their fundamental components:
Sources
Technological Innovations: This refers to the latest advancements in technology that transform the way we live, work, and interact. For example, artificial intelligence (AI) is a technological innovation that can automate tasks previously done by humans, offering both opportunities for efficiency and challenges in job displacement and data security.
Regulatory Developments: These are changes or new introductions in laws and regulations that organisations must comply with. An example of regulatory development is the introduction of stricter data protection laws that require businesses to safeguard the personal information of their customers more rigorously.
Geopolitical Dynamics: This term refers to the way political actions and relationships between countries influence the global and local economic environment. For instance, a trade agreement between two countries might open new markets for businesses or, conversely, a trade war could impose tariffs that make it more expensive to import certain materials.
Attributes
Management Strategies
Emerging risks pose a challenge to traditional risk management frameworks due to their inherent uncertainty and complexity. Nonetheless, by delineating their fundamental components and adopting a proactive, flexible management approach, organisations can enhance their preparedness for these uncertainties. This enables the transformation of potential challenges into strategic opportunities for innovation and competitive differentiation.
What are Emerging or Principal Risks?
Emerging or principal risks are serious uncertainties that have the ability to disrupt an organisation's operations, strategy, or overall well-being. These uncertainties are frequently distinguished by their unpredictability, complexity, and potential for significant consequences. While principal risks are well-established and widely acknowledged, emerging risks are freshly found or changing and may not yet be fully recognised.
How to Identify Emerging Risks?
Identifying such risks is the cornerstone of proactive risk management. It involves leveraging horizon scanning to search the external environment for signals of change that could potentially impact the organisation. Techniques such as environmental scanning, trend analysis, and scenario planning are valuable in identifying emerging risks. Engaging with stakeholders, including customers, employees, and industry experts, can also provide insights into new challenges and opportunities on the horizon.
Uncover potential emerging risks with our comprehensive Horizon Scanning Guide. Aevitium LTD's downloadable resource offers step-by-step instructions and best practices to enhance your organisation's risk identification process. Download it now!
How to Assess and Prioritise Emerging Risks?
Once identified, the next step is to assess and prioritise these risks based on their potential impact on the organisation and the likelihood of their occurrence. Given the inherent uncertainty of emerging risks, this process often involves a combination of qualitative judgment and quantitative analysis. Risk assessment tools like risk matrices and impact/probability charts can help in evaluating and ranking risks, enabling organisations to focus their resources on the most significant threats.
How to Mitigate them?
Organisations must create and implement plans to handle evolving risk strategies. The response—whether to prevent, minimise, transfer, or accept the risk—will be determined by the organisation's risk appetite and strategic objectives.
We should create a bespoke action plan for each important risk, describing precise steps to mitigate or capitalise on the risk. The uncertainty of emerging hazards needs strategy change as new information becomes available, emphasising the value of flexibility and agility.
When establishing plans to manage technical threats, for example, take into account both standard cybersecurity measures and novel AI-powered monitoring systems. As new threats emerge, make sure your action plans reflect the most recent defensive technologies.
When to Implement an Emerging Risk Framework?
An emerging risk framework becomes essential in several scenarios, reflecting the need for organisations to adapt and respond to the rapidly changing risk landscape. We invite you to read our annual review of Risk Mega-Trends to gain some insights on areas of focus.
Here are key situations when implementing such a framework is particularly required:
Rapid Technological Advancements
When an organisation operates in or is entering sectors characterised by rapid technological changes, such as fintech, biotech, or digital services, the pace of innovation can introduce new risks that were previously unimagined.
Example: A leading automotive manufacturer designs an emerging risk framework to address risks associated with the transition to electric vehicles (EVs), including battery technology innovations and changing consumer preferences towards sustainable transportation.
Global Expansion
Regulatory Changes
Increasing Environmental Concerns
Market’s Volatility and Economic Uncertainty
High-Profile Data Breaches or Cybersecurity Threats
Changes in Consumer Behaviour
Supply Chain Complexities
Crisis and Disaster Recovery
Industry Disruption
In essence, an emerging risk framework is required whenever an organisation must navigate uncertainty, respond to rapid changes in its external environment, or seeks to maintain a competitive edge by being proactive rather than reactive in its risk management practices. It provides a structured approach to identifying, assessing, and managing risks that are uncertain but could have significant implications for the organisation's strategic objectives and operational resilience.
How to Develop an Emerging Risk Framework?
Implementing an emerging risk framework from scratch involves establishing foundational elements, processes, and practices within an organisation to systematically identify, assess, and manage risks that have not yet fully materialised or are not well understood.
Here are the steps you can take to design these new capabilities and tools, while developing a risk aware culture if your organisation lacks one:
Step 1: Gain Executive Buy-in and Establish Leadership
Secure commitment from top management by demonstrating the value of an Emerging Risk Framework in safeguarding and enhancing competitive advantage. You can leverage the information enclosed in this article to build your business case.
Appoint a risk management leader or team responsible for the development and implementation of the framework. This could be a Chief Risk Officer (CRO) or equivalent position if such role does not already exist.
Step 2: Define the Framework's Scope and Objectives
Step 3: Establish a Risk Identification Process
Step 4: Create Risk Assessment Criteria
Step 5: Design Risk Response Strategies
Step 6: Integrate into Organisational Processes
Step 7: Monitor, Review, and Report
Step 8: Continuously Improve
Implementing an effective framework to identify emerging risks is a dynamic and iterative process that requires commitment across the organisation. By following these steps, an organisation can establish a robust framework capable of managing their risks proactively, thereby enhancing its resilience and strategic agility.
In a world characterised by rapid change and uncertainty, the ability to manage emerging risks effectively is more important than ever. By developing and implementing a comprehensive approach to identifying emerging risks, you organisations can not only protect themselves against potential threats but also seize new opportunities that arise from these uncertainties. This proactive approach to risk management is essential for driving innovation, enhancing resilience, and securing sustainable success in the modern business environment.
It's time to take a proactive stance on emerging risks. Begin by conducting a thorough review of your current risk management practices, with a focus on identifying gaps in your approach to emerging risks. Engage with a wide range of stakeholders to gather diverse perspectives and insights. Remember, in the dynamic landscape of emerging risks, staying informed, agile, and prepared is the key to navigating the challenges and opportunities ahead.
To navigate the complex landscape of modern risks, partnering with a trusted risk advisor could prove particularly valuable. At Aevitium LTD, our team of seasoned risk and compliance experts and former regulators brings unparalleled insight and tailored solutions to uncover potential threats and opportunities that you may have overlooked internally.
By staying ahead of industry trends and emerging threats, Aevitium LTD ensures your organisation is prepared for the unexpected. By offering an extensive range of services such as trend analysis and business resiliency planning, Aevitium LTD ensures the strong backing required to safeguard your organisation, personnel, and resources.
Take the first step towards future-proofing your organisation. Schedule a free consultation with our risk management experts and advisors. Equip your organisation with the knowledge and tools to thrive in an unpredictable world.
Additional Resources:
For a deeper understanding of cybersecurity risks, visit National Institute of Standards and Technology (NIST).
To learn more about managing emerging risks, the Global Association of Risk Professionals (GARP)offers a range of resources and certification programs.
For updates on regulatory compliance requirements, The International Compliance Association (ICA)provides comprehensive guides and articles.