In a risk environment that is growing more perilous and costly, companies are striving for resilience and value
Boards need to embed strategic risk capabilities throughout the organization
COMPLEX ENVIRONMENT
Today’s corporate leaders are navigating a complex environment that is changing at an ever-accelerating pace. The risk environment has become a top challenge to the survival and profitable growth to many organizations in various industries and sectors.
Geopolitical uncertainties are altering business conditions and challenging the footprints of multinationals. Corporate reputations are vulnerable to single events, as risks once thought to have a limited probability of occurrence are actually materializing.
Our industry-aligned teams help clients navigate macroeconomic and geopolitical uncertainties as a consequence of risks arising in the areas of strategy, finance, products, operations, and compliance and conduct.
STRENGTHEN RESILIENCE
More rigorous decision making can enhance the longer-term resilience of a company’s business model, particularly in volatile markets or externally challenged industries.
Companies are challenged by emerging types of risks for which they need to develop robust, effective risk management plans:
- Effective Risk Operating Model – Identify risks across the organization and implement the appropriate controls to ensure timely reporting and corresponding actions to the board and senior management. Risks can be grouped in categories, such as financial, nonfinancial, and strategic,
- Robust Risk Governance – An effective governance structure with clear accountabilities maintains a risk culture that strongly reinforces better risk and compliance management across the organization,
- Crisis Preparedness – Ensure that the effort is led by the board and senior management. Top leadership must define the main expected threats, the worst-case scenarios, and the actions and communications that will be accordingly rolled out.
- Investor Confidence – For businesses seeking financial support, maintaining a positive corporate reputation is paramount. Whether individual or institutional, investors are more inclined to invest in companies with a strong reputation. A favorable image instills confidence, contributing to a company’s ability to secure funding and drive growth.
- Competitive Advantage – In a competitive market, a positive reputation serves as a differentiator. Customers are likely to choose a company with a sterling reputation over competitors. This competitive edge extends beyond products or services, influencing purchasing decisions and market positioning.
The path to risk resilience is a mighty effort led by the board and senior management. Success depends on the support of a thriving risk culture and viable crisis preparedness and response.
Risk management at nonfinancial companies has not kept pace with this evolution. Risk management remains an underdeveloped and siloed capability, receiving limited attention from corporate leaders.
- Executive leadership must define the main expected threats, the worst-case scenarios, and the actions and communications that will be accordingly rolled out.
- Companies must assess their own resilience and challenging key areas across the organization for potential weaknesses.
- Targeted countermeasures must be developed in advance to strengthen resilience.
- Train key managers at multiple levels on what to expect and enable them to feel the pressures and emotions in a simulated environment.
- Each crisis can unfold in its unique and unpredictable ways, but companies should follow a few fundamental principles of crisis response in all situations.