Invest for risk function efficiency

CROs say the top measure for empowering their risk teams to address risk challenges is improving data, analytics, and visualization/dashboards. Data analytics ranks as a leading risk area modernization priority: 48% of CROs will focus on integrating data analytics and predictive modeling over the next two years to support risk identification and decision-making (compared to 38% over the last two years).

High quality data analytics—supported by a comprehensive data strategy—is a powerful enabler of risk efficiency. It allows risk teams to surface and disseminate dynamic, invaluable insights that allow stakeholders to manage risks more proactively and make faster, more informed, and more strategic decisions. When risk teams can identify risk factors earlier, businesses can take steps to prevent them before costly business disruptions result in lost productivity and revenue.  

To accelerate risk management now and within the next two to five years, CROs say artificial intelligence (AI) and machine learning (ML) are the most critical digital tools for their organizations to adopt. Three-quarters of companies already incorporate AI and ML into their risk management practices. 

However, top use cases right now are all about how the wider business uses AI and ML, including monitoring the success of implemented tools and considering their technical feasibility and alignment with organizational capabilities. Few risk executives have put as much focus on their own function’s use of these technologies for process optimization and cost takeout.

If enterprises can figure out how to harness the power of AI and ML sooner rather than later, as well as other advanced tools, they have a better chance at turning risk management into a competitive advantage. 

Using leading technology to enhance and modernize business operations is table stakes, including in the risk department. Yet greater use of technology throughout the enterprise increases cyber risk.

Over the last two years, 45% of CROs have optimized cybersecurity measures to safeguard against potential threats and vulnerabilities, ranking as top risk area modernization priority. In the next two years, it will remain the #1 risk area to modernize. Further, CROs identify the implementation of cybersecurity solutions to mitigate cyber risk and threats as the third-most vital method they use to accelerate risk management processes within their organizations. And, they expect to rely on cybersecurity tools even more over the next two to five years.

Some of the best cybersecurity tools allow for continuous updates to combat the latest threats as they arise. In a world where companies must prepare for when they experience a hack, not if, the most up-to-date technology is worth its weight in gold. And the tools are likely to cost far less than the price of a major data breach.

Nearly all risk leaders (96%) rank technology-driven risk management as a top investment area, due to receive an increased share of the risk management budget over the next 12 months. Adopting strategies and methods for digital acceleration will set risk organizations on the path to technology-driven risk management, which involves using modern solutions like automation, cloud, data, analytics and other emerging technologies in coordination to enhance both efficiency and effectiveness.

There are countless digital acceleration possibilities and applications to explore, and the potential benefits of the journey are significant: shifting behaviors and tasks from manual to digital, enhancing traditional approaches to risk management, and creating more seamless, scalable and resilient risk processes and control environments.

An effective risk department is a well-trained one. Nearly half of CROs say they empower their risk teams to address pressing risk challenges by increasing training for employees in targeted areas. Also, when allocating money for their departments, CROs name training and capacity-building efforts for risk management personnel as their third-most funded area.

The specialized skills and knowledge required for delivering risk services effectively and efficiently are continuously expanding. With data and technology at the heart of efforts to improve risk preparation, management and efficiency, risk professionals must be increasingly well-versed in technical areas, like data analysis, and understand how to use modern tools and solutions.