Global Risk Landscape Report 2021 - The art of the unknown
Organizations that embraced risk during the coronavirus pandemic have coped better with the crisis and survived, even thrived, despite the global calamityBusinesses are used to having to deal with a wide range of risks and uncertainty, but the COVID-19 pandemic wrought disruption on an unprecedented level. Lockdowns across the globe shook the foundations of our world economy.
In our sixth survey on risk, BDO set out to discover how senior business leaders coped with the prolonged uncertainty of 2020, and the main obstacles they overcame to be able to continue their operations. We surveyed 500 C-suite business leaders globally across a wide range of industry sectors to find out how they adapted their business models and reinvented products and services – or if they suffered from “disaster paralysis”.
COPING WITH FUTURE CRISES
How should long-term risk management practices and principles evolve after this extraordinary year? In this report, we set out key themes that companies shouldconsider. These include changing blame culture and attitudes to risk; the usefulness of formal risk management practices, such as assessments and frameworks; and the effective use of up-to-date technology in developing data-driven risk assessments.The data shows that companies with a risk-welcoming mindset respond better to crises. When asked which factors prevented their company from adapting quickly to the situation, 24% of risk-averse companies cited “stubbornness: choosing to continue with pre-pandemic plans”. Far fewer of those with different risk mindsets cited the same problem – 15% of risk-takers and 0% of risk-welcomers. While many factors shape the impact of crises, blame culture can significantly exacerbate problems. Almost a quarter (23%) of all respondents said blame culture stifles their company’s ability to respond effectively to disruption. Sectors where respondents agreed that blame culture is present are also those where the pandemic’s impact was much worse than expected. In this report, we look at who is responsible for a company’s culture, offer practical solutions to limit a tendency to blame and how to develop a positive, risk-welcoming culture.
Formal risk management practices, such as assessments and frameworks, are invaluable. But has COVID-19 proven them to be too rigid to be effective, when faced with unprecedented disruption? Indeed, 90% of all respondents said the events of 2020 have triggered their organization to completely re-evaluate its risk framework.The pandemic has also strengthened the relationship between technology and risk management. The use of up-to-date technology is essential to evolve risk management from being just reactive to proactive and predictive. Yet, only 11% of respondents use technology to forecast future potential risk, while investing in new technology or accelerating digital transformation efforts was the most common change that companies made in response to the pandemic (36% of respondents).
From geopolitical tensions to climate change, companies will inevitably continue to face many risks and uncertainties. In particular, the pandemic has focused companies’ attention on environmental, social and governance (ESG) issues, which will last far beyond COVID-19. As Patrick Verkooijen, chief executive of the Global Center for Adaptation, said in March 2021, the pandemic has been a “wake-up call” for environmental risks and “we are utterly unprepared for the next crisis – the climate emergency”.The COVID-19 pandemic has demonstrated how quickly crises can escalate, and why businesses must be ready to react and adapt. Companies can thrive even in the face of massive uncertainty by altering their risk practices to become more accepting of risk. It is only by seeing crises as positive opportunities to expand their capabilities, rather than falling victim to disaster paralysis, that companies will thrive no matter what hits them.