- 61% of executives expect to see a significant increase in the level of risk they will be responsible for in the next three to five years.
- Majority (90%) of businesses have increased their pace of risk transformation in order to manage risk.
- 68% of respondents believe that integration and interconnection of risk management systems, domains and processes significantly enhanced the effectiveness of risk-related decision-making.
- AI and generative AI identified as the most popular types of technology for managing additional risk responsibilities in the next three to five years.
Risk management is becoming more complex and challenging with the pace of risk transformation escalating, according to KPMG International’s new Future of Risk report.
The global survey, which polled 400 executives in February and March 2024, found that 61% of executives expect to see a significant increase in the level of risk they will be responsible for in the next three to five years.
The research found that risk management professionals are aware of the need to address challenges presented by a rapidly changing geopolitical and financial landscape. In fact, risk management professionals’ number one focus in the next one to three years is to proactively adapt to new risk types such as AI; geopolitical; reputation; environmental, social and governance (ESG); IT and cyber risk. Interestingly, the second-biggest priority is to leverage advanced analytics and AI for risk management.
Adapting to the increased pace of risk transformation
As risk functions grapple with rising external risks and internal challenges, professionals are expected to be more productive and effective.
The survey found that the vast majority (90%) of respondents believe that the pace of risk management transformation, fueled by technological disruptors, has increased, with 56% indicating that it has risen sharply.
Additionally, the survey found that risk management transformation professionals understand the need to address the changing face of risk. Over the next one to three years, executives have identified that their top priority is to adapt proactively to new risk types such as AI, geopolitical, reputation, ESG, IT and cyber risks. Their second-biggest priority is to adopt advanced analytics and AI for risk management.
In fact, 41% of executives expect to spend more than half of their risk management budget on technology in the next 12 months, compared with just 28% in the previous year.
Effectively integrating systems, domains and processes
Survey respondents recognize the need for collaboration between the risk function and broader strategic, operational and financial functions of a business. Of those surveyed, 68% believe that integration and interconnection of risk management systems, domains and processes had a significant positive impact on the effectiveness of risk-related decision-making. However, only 46% of respondents rate the level of collaboration between risk domains as adequate.
In addition, a majority of CEOs and COOs (66%) and CROs and risk managers (57%) believe that cross-functional task forces, collaboration and communication are essential for better understanding the likelihood and impact of large-scale events and developing greater resilience and agility.
AI and Gen AI popular amongst practitioners
Technological advances are accelerating which is enabling risk professionals to manage change better, while at the same time bringing fresh risks.
The study found that AI and generative AI are the most popular types of technology for managing additional risk responsibilities. It is also the most commonly identified solution that the risk function is planning to invest in over the next three to five years. According to the survey, this technology is allowing practitioners to enhance their ability to filter through data, spot trends and suggest solutions.
