Natural disasters, political rancor, and economic ups and downs are creating new risks for businesses, says a new PwC US Risk in Review Report. To address the new realities of the growing global risk landscape, PwC recommends the following risk management approaches for 2012:
Increasing cross-communication: Place greater emphasis on communications and data sharing in 2012 and take steps to improve cross-functional and departmental communication.
Improving data quality and reporting: Enhance global economic teams to help improve data quality and put in place improved processes for reporting data. Different business units should meet periodically with different business units to review and exchange information and data as a form of early alert to possible upcoming risks to the business.
Better forecasting and scenario analysis: Leverage more sophisticated tools such as early-warning systems and contingency plans to reconfigure approaches to manage risk (i.e. set up scenario models or Monte Carlo analysis geared to the nuances of the business, run models as events unfold, etc.)
Elevating the CRO: Put risk management role on the proactive offensive instead of reactive defense by giving CROs more cross-functional access and ability to effect decision-making.
Integrating risk management: Manage risk holistically by continuing to integrate risk management into decision-making processes relating to “traditional” functions (i.e. strategic planning). Don’t exclude new areas of risk (i.e. talent management and outsourcing), but address and integrate them into decision-making processes.
Bolstering IT: Address data privacy and security concerns and take stock of where to build better processes, practices, procedures and technical defenses. Shifting technology and heightened competition for new customers in new markets are also exposed to more risks, so it’s imperative to study the setbacks and successes of peers who pioneered the use of these new technologies.
Greater board involvement: Understand the risks facing a company and have in-depth discussions with management to make sure those risks are being handled properly. The discussion should also cover potential risks that are not yet on management’s radar and what the implications of those emerging risks might be.
“With today’s complex, volatile and uncertain world, risk management leaders have their work cut out for them, especially with the fact that risk is always changing. Companies must adopt a new and more robust approach to defining, communicating and managing their global risk profile,” concluded Simon.
To download a full copy of the report, Risk in Review, please visit: http://www.pwc.com/riskinreview