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<?xml version="1.0" encoding="utf-8"?><feed xmlns="https://www.w3.org/2005/Atom" xmlns:dc="https://purl.org/dc/elements/1.1/" xmlns:thr="https://purl.org/syndication/thread/1.0"> <title>z__Risk Insights</title> <link rel="self" type="application/atom+xml" href="https://pwc.blogs.com/resilience/atom.xml" /> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/" /> <id>tag:typepad.com,2003:weblog-107781494062552845</id> <updated>2019-05-17T15:11:32+01:00</updated> <subtitle>Best practices on environmental, socio-economic, cyber and financial risk management to help you capitalise on change and recover from crisis. </subtitle> <generator uri="https://www.typepad.com/">TypePad</generator> <entry> <title>A populist tide is rising. What course should business steer?</title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2019/05/a-populist-tide-is-rising-what-course-should-business-steer.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2019/05/a-populist-tide-is-rising-what-course-should-business-steer.html" thr:count="2" thr:updated="2019-05-29T14:17:56+01:00" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e20240a45e84db200c</id> <published>2019-05-17T15:11:32+01:00</published> <updated>2019-05-17T15:11:32+01:00</updated> <summary>Business leaders have seen it coming for a while. The world is moving toward nationalism, devolved nations and fragmenting into regional trading blocks. What will the impact be on the global economy? </summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Demographic and social change" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Geopolitical risks" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Societal Resilience" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Strategic risk management" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Supply chain management" /> <category scheme="https://sixapart.com/ns/types#tag" term="Brexit" /> <category scheme="https://sixapart.com/ns/types#tag" term="CEO Survey" /> <category scheme="https://sixapart.com/ns/types#tag" term="European politics" /> <category scheme="https://sixapart.com/ns/types#tag" term="immigration" /> <category scheme="https://sixapart.com/ns/types#tag" term="middle class" /> <category scheme="https://sixapart.com/ns/types#tag" term="nationalism" /> <category scheme="https://sixapart.com/ns/types#tag" term="populism" /> <category scheme="https://sixapart.com/ns/types#tag" term="strategic risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="supply chain risk" /> <category scheme="https://sixapart.com/ns/types#tag" term="US China relations" /> <category scheme="https://sixapart.com/ns/types#tag" term="war on talent" /> <category scheme="https://sixapart.com/ns/types#tag" term="world economies" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p>Dr. Alexis Crow, Lead, Geopolitical Investing practice, PwC US and Andrew Gray, Partner and Global Head of Brexit, PwC UK</p><p>The turmoil surrounding the UK’s planned exit from the European Union may be the most visible manifestation of rising populism in Europe and elsewhere, but it is hardly the only one. The electoral successes of populist parties and politicians in Austria, Brazil, Italy and Poland, not to mention the U.S., provide further confirmation of the trend. They are all signs of rising wave of populist sentiment around the globe, which respondents to PwC’s <a href="https://www.pwc.com/gx/en/ceo-survey/2019/report/pwc-22nd-annual-global-ceo-survey.pdf">22</a><a href="https://www.pwc.com/gx/en/ceo-survey/2019/report/pwc-22nd-annual-global-ceo-survey.pdf"><sup>nd</sup></a><a href="https://www.pwc.com/gx/en/ceo-survey/2019/report/pwc-22nd-annual-global-ceo-survey.pdf"> Annual Global CEO survey</a> identified as one of the top 10 threats their organisations face in 2019. Aggregated and amplified by social media, populist resentment of business and political elites and resistance to immigration have emerged as potent political forces that can destabilise economies and governments and give rise to policies that could disrupt the free movement of goods and people around the world.</p><p><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e20240a45e84bb200c-pi" style="float: left;"><img alt="Visuals for Populism blog design Facebook v1.0" class="asset asset-image at-xid-6a00d83451623c69e20240a45e84bb200c img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e20240a45e84bb200c-500wi" style="margin: 0px 5px 5px 0px;" title="Visuals for Populism blog design Facebook v1.0" /></a>Brexit, and above all the prospect of a ‘no-deal’ Brexit that could cause economic disruption across the Continent of Europe and beyond, is the greatest immediate risk to global financial stability. (Although the UK’s exit date from the EU has been pushed back to 31 October 2019, a ‘no-deal’ Brexit remains a distinct possibility.) But it’s not the only way that rising populist sentiment is making business more difficult and uncertain. Cross-border trade is becoming more expensive and complex. The hunt for talent may become more challenging as countries enact anti-immigration policies and close or tighten their borders. And if, as is widely predicted, populist and nationalist parties take seats from mainstream parties in the upcoming European Parliamentary elections, consensus on key policy issues such as immigration and trade will be harder to achieve. Populist factions could also hamper a unified European response to sudden shocks, such as the meltdown of a national economy or a surge of migrants across the Continent’s southern and eastern borders.</p><p>The agendas of the various populist movements, though varied, have strong commonalities rooted in a sense of grievance and victimisation and expressed in demands for tighter immigration controls; greater local control of national economies; and hostility toward political and economic elites. Those attitudes reflect anxieties over rising wealth inequality; declining income and social mobility; and the spread of automation and the fear that job losses may follow in its wake, compounded by the belief that political and economic elites are out of touch with the day-to-day lives of ordinary citizens.</p><p>Those beliefs are, somewhat counterintuitively, more pronounced among middle-class than lower-class voters. An exhaustive <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2822059">analysis</a><a href="#_ftn1" name="_ftnref1">[1]</a> of the 2016 U.S. presidential election by the Gallup polling organisation found that supporters of Donald Trump were more affluent than the average voter, while poorer voters were somewhat more likely to support Hillary Clinton. Those findings suggest that <em>absolute</em> levels of social and economic status drive populist sentiment less than perceived <em>comparative</em> status. As sociologist Arlie Hochschild puts it in her book on the U.S. Tea Party movement, <a href="https://go.redirectingat.com/?id=66960X1516588&xs=1&url=https%3A%2F%2Fwww.amazon.com%2FStrangers-Their-Own-Land-Mourning%2Fdp%2F1620972255"><em>Strangers in the Their Own Land</em></a><a href="#_ftn2" name="_ftnref2"><em>[2]</em></a>, populist supporters see themselves as standing in line on a hill leading to prosperity at the top, while immigrants, minorities and women try to cut in line ahead of them. This perspective, as Christine Lagarde, managing director of the International Monetary Fund, has said, in combination ‘with lower growth, more inequality and much more transparency, [are the] ingredients of what is defined now as a crisis of the middle class in the advanced economies.’<a href="#_ftn3" name="_ftnref3">[3]</a> This crisis is spurring the rise of populist movements and parties, Lagarde suggests.</p><p>Business—and here we mean commerce—has a vital role to play in mitigating the negative impacts of populism and counteracting the pull toward extremism. But it will require reversing the trend of recent years, which has seen companies turn away from investing in people and new skills acquisition toward taking on additional debt to fund share buybacks and dividend payments. In the U.S., this decline in investment in the non-financial economy is apparent in a recent <a href="https://nabe.com/NABE/Surveys/Business_Conditions_Surveys/January_2019_Business_Conditions_Survey_Summary.aspx">business conditions survey</a> conducted by the National Association of Business Economics.  It found that 84% of companies surveyed had not changed their hiring or investment plan in the wake of the passage of 2017 Tax Cuts and Jobs Act.<a href="#_ftn4" name="_ftnref4"><sup>[4]</sup></a> Instead, many companies have been forced to duplicate supply chains amid trade uncertainty and invest heavily in scenario planning, rather than deploy long-term capital to the skills and workforce of the future—an approach that would benefit citizens of every class and age group.</p><p>In addition to increased investment, commerce can help to mitigate the threat of populism by actively engaging with governments and the public to help shape policies that address anxieties over automation and declining living standards. The business sector can also do a better job of making the case that diversity, inclusion, environmental responsibility and increased trade add value to national economies and increase individual opportunity. And finally, business can build trust by visibly seeking a balance between the public good and the speed of innovation, between data-driven value and privacy and security, and between local, national, and global markets.</p><p>Ultimately, though, the most effective way to build trust is to invest in the real economy, but such investments are unlikely to materialise in the absence of a positive long-term outlook for the future. Right now, with the shadow of populism looming larger even as the odds of a chaotic Brexit have shrunk and the credit cycle nearing maturity, the global outlook is highly uncertain. The only certainty, perhaps, is that low growth driven by low investment in the real economy may only pour more fuel on the fires of populism.</p><p><span style="font-family: arial, helvetica, sans-serif; font-size: 8pt;"><a href="#_ftnref1" name="_ftn1">[1]</a> <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2822059">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2822059</a></span></p><p><span style="font-family: arial, helvetica, sans-serif; font-size: 8pt;"><a href="#_ftnref2" name="_ftn2">[2]</a> Arlie Hochschild, Strangers in Their Own Land: Anger and Mourning on the American Right, The New Press, New York. 2016</span></p><p><span style="font-family: arial, helvetica, sans-serif; font-size: 8pt;"><a href="#_ftnref3" name="_ftn3">[3]</a> From remarks delivered at a panel discussion at the World Economic Forum, Davos, Switzerland, 18 January 2018</span></p><p><span style="font-family: arial, helvetica, sans-serif; font-size: 8pt;"><a href="#_ftnref4" name="_ftn4"><sup>[4]</sup></a> <a href="https://nabe.com/NABE/Surveys/Business_Conditions_Surveys/January_2019_Business_Conditions_Survey_Summary.aspx">January 2019 Business Conditions Survey Summary</a>, National Association of Business Economics</span></p></div></content> </entry> <entry> <title>The uncertainty principle: Current China-U.S. relations test business and government </title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2019/04/the-uncertainty-principle-current-china-us-relations-test-business-and-government-.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2019/04/the-uncertainty-principle-current-china-us-relations-test-business-and-government-.html" thr:count="1" thr:updated="2019-05-11T18:11:54+01:00" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e20240a49bc055200b</id> <published>2019-04-02T15:43:19+01:00</published> <updated>2019-04-03T14:19:32+01:00</updated> <summary>Until new governance and dispute-resolution structures evolve to adapt to the digital era, we will continue to see fights over control of data and platforms as well as over the distribution of the wealth generated by that control. </summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Geopolitical Resilience" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Geopolitical risks" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Regulation and compliance" /> <category scheme="https://sixapart.com/ns/types#tag" term="CEO Survey" /> <category scheme="https://sixapart.com/ns/types#tag" term="China" /> <category scheme="https://sixapart.com/ns/types#tag" term="data protection" /> <category scheme="https://sixapart.com/ns/types#tag" term="Eurasia Group" /> <category scheme="https://sixapart.com/ns/types#tag" term="global trade" /> <category scheme="https://sixapart.com/ns/types#tag" term="international trade" /> <category scheme="https://sixapart.com/ns/types#tag" term="strategic policy" /> <category scheme="https://sixapart.com/ns/types#tag" term="top risks 2019" /> <category scheme="https://sixapart.com/ns/types#tag" term="trade" /> <category scheme="https://sixapart.com/ns/types#tag" term="US" /> <category scheme="https://sixapart.com/ns/types#tag" term="world trade systems" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p>By James Chang, China Financial Services Consulting Leader, PwC China and Jim Woods, Global and China/Hong Kong Risk Assurance Leader, PwC China</p><p>Cyber threats and terrorism don’t worry business leaders as much as they used to, judging from the responses to PwC’s <a href="https://www.pwc.com/gx/en/ceo-survey/2019/report/pwc-22nd-annual-global-ceo-survey.pdf">2019 Global CEO survey</a>. But that doesn’t mean that CEOs are breathing easy. The focus of their concerns has shifted from hackers and terrorists to political trends and government policy, with over-regulation, policy uncertainty, geopolitical uncertainty, protectionism, populism and trade conflicts cited among the top 10 threats.</p><p><br /><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e20240a4772ea4200d-pi" style="float: left;"><img alt="Social media graphics for US-China blog v1.0 Linkedin" class="asset asset-image at-xid-6a00d83451623c69e20240a4772ea4200d img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e20240a4772ea4200d-500wi" style="margin: 0px 5px 5px 0px;" title="Social media graphics for US-China blog v1.0 Linkedin" /></a>The most prominent trade conflict is that currently playing out between China and the U.S. As Eurasia Group states in its recent report, <a href="https://www.eurasiagroup.net/files/upload/Top_Risks_2019_Report.pdf">2019 Top Risks</a>, the Trump Administration, ‘determined to force U.S. companies to reduce their reliance on inputs from China and to limit the transfer of intellectual property’, is using ‘non-tariff barriers as a key tool in this push, including investment restrictions, export controls, financial sanctions, and criminal indictments’.</p><p>China is responding with non-tariff measures ranging from 'constraints on the transfer of digital information to anti-trust decisions.' Such tit-for-tat measures, the report says, ‘will disrupt firms and broader industries, increasing costs and decreasing collaboration’.<a href="#_ftn1" name="_ftnref1">[1]</a></p><p>That disruption is already playing out around the globe, as companies diversify their customer and supplier bases, accelerate procurement schedules, and turn inward in search of growth. Nowhere are these trends more apparent than in China, where, according to the CEO survey, local businesses are shifting their focus to the domestic market, where the middle class is burgeoning, and to markets in Africa, the Middle East and Southeast Asia. Accelerating this movement is the Chinese government’s Belt and Road initiative, which promises to commit multiple trillions of dollars to investment and infrastructure projects across Asia, Africa, and Eastern Europe.</p><p><strong>Seeking alternative paths to growth</strong></p><p>The ripple effects of the current China-U.S. trade relations are by no means confined to China. Respondents to the CEO survey who reported that they were ‘extremely concerned’ about trade conflicts say that they are adapting to their new environment by adjusting their supply chains and sourcing strategies, targeting growth in alternate territories, delaying capital expenditures, shifting production to alternate locations and delaying foreign direct investment. Strong majorities are also relying on capturing operational efficiencies, emphasising organic growth and launching new products or services to reach their growth targets.</p><p><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e20240a4772eae200d-pi" style="float: right;"><img alt="Social media graphics for US-China blog v2.0 Linkedin" class="asset asset-image at-xid-6a00d83451623c69e20240a4772eae200d img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e20240a4772eae200d-500wi" style="margin: 0px 0px 5px 5px;" title="Social media graphics for US-China blog v2.0 Linkedin" /></a>As companies continue their transformations into digital enterprises, they must also closely monitor changes to data governance laws and regulations enacted as part of the ongoing renegotiation of trade agreements and the rules of international trade. Data is the lifeblood of digital business, and around the world, the debate over data is being framed as a stark choice between data barriers and the free flow of information, and between data localisation and data globalisation. The outcome of that debate will have significant implications for everything from AI to the fast-growing ‘access economy’, which reserves its greatest rewards for digital platforms that arrange rental access to assets such as housing and cars. To prepare for what’s likely to be a patchwork of competing and often conflicting data governance regimes, many global businesses are considering decentralised IT operating models and tiered approaches to data governance that apply global, regional and local templates to country-specific regulations.</p><p>Businesses are also taking a new, more holistic approach to risk. Checklists, heat maps and annual risk reviews are no longer adequate to identify and mitigate emerging risks in a volatile marketplace. That’s why many businesses are pivoting to a more dynamic risk posture, aided by analytics that take into account large quantities of structured and unstructured data. Constantly monitoring everything from shipping data to social media chatter to shifting demand patterns, analytics can help business leaders make better-informed decisions and respond with agility and flexibility to rapidly changing trends and events.</p><p><strong>A gap in governance</strong></p><p>Actions by individual businesses alone, however, can’t defuse international tensions or construct workable, widely accepted dispute-resolution mechanisms. Those mechanisms are in need of a major overhaul, according to ‘[a] rising chorus [that] is calling out the dangers of an outdated world trade system and laying bare the deficiencies of the World Trade Organisation’, as PwC notes in its recent report <a href="https://www.pwc.com/us/en/library/risk-regulatory/strategic-policy/top-policy-trends-2019.html">Top Policy Trends 2019</a>.<a href="#_ftn2" name="_ftnref2">[2]</a></p><p>Business can and should contribute to shaping new policies and governance structures to address the conflicts that will inevitably arise during the transition to a digital economy. Business has an opportunity in the current unsettled environment to ‘become the de facto harmonisers of how data is collected, protected and used, at least across philosophically-aligned nations’,<a href="#_ftn3" name="_ftnref3">[3]</a> as the Top Policy Trends report says. To assume this role, companies will need to make significant investments in data governance, be transparent about the use and storage of data, and increase individuals’ control over their personal information. By disclosing how they collect, store and use data, businesses can position themselves to influence new legislation and standards. And by incorporating data privacy standards and including privacy and cybersecurity expertise in strategy formulation and product design they can establish the trust that earns them a place at the policymaking table.</p><p>We believe businesses can best serve themselves and society by actively engaging with policymakers, regulators and the public to balance the need for innovation and the demand for reasonable data safeguards, the desire for robust international commerce and the need for an orderly system of global trade. A new world is forming around us, and it’s in the interest of business to help decide its shape.</p><p><a href="#_ftnref1" name="_ftn1">[1]</a> All quotes in this paragraph are from ‘<a href="https://www.eurasiagroup.net/files/upload/Top_Risks_2019_Report.pdf">2019 Top Risks</a>’, Eurasia Group, 2019</p><p><a href="#_ftnref2" name="_ftn2">[2]</a> https://www.pwc.com/us/en/library/risk-regulatory/strategic-policy/top-policy-trends-2019.html</p><p><a href="#_ftnref3" name="_ftn3">[3]</a> Ibid.</p></div></content> </entry> <entry> <title>Innovation at a crossroads: Restoring trust in technology </title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2019/03/innovation-at-a-crossroads-restoring-trust-in-technology-.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2019/03/innovation-at-a-crossroads-restoring-trust-in-technology-.html" thr:count="3" thr:updated="2019-05-15T23:59:58+01:00" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e20240a440b8f4200c</id> <published>2019-03-01T16:48:42+00:00</published> <updated>2019-03-04T16:04:25+00:00</updated> <summary>In 2018, technology competition took on a sharp political edge, creating formidable barriers to the movement of human and financial capital that drive innovation. The ripple effects will be felt in key technology sectors in ways no one can predict.</summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Innovation" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Regulation and compliance" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Technological Resilience" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Technology breakthroughs" /> <category scheme="https://sixapart.com/ns/types#tag" term="apple" /> <category scheme="https://sixapart.com/ns/types#tag" term="ceo survey" /> <category scheme="https://sixapart.com/ns/types#tag" term="cybersecurity" /> <category scheme="https://sixapart.com/ns/types#tag" term="data" /> <category scheme="https://sixapart.com/ns/types#tag" term="digital threats" /> <category scheme="https://sixapart.com/ns/types#tag" term="GDPR" /> <category scheme="https://sixapart.com/ns/types#tag" term="innovation risk" /> <category scheme="https://sixapart.com/ns/types#tag" term="risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="top risks" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p><strong>By David Sapin, PwC Risk and Regulatory Consulting Leader, PwC US and George Stylianides, PwC Global Risk Consulting Leader, PwC UK </strong></p><p><span style="font-weight: 400;">The convergence of advanced digital technologies, the increasing speed of the internet, and the seemingly infinite processing power of cloud computing have unleashed a wave of innovation and change unimaginable only a few years ago. But other counter-currents—public concern over the adequacy of privacy protections and data security, rising regulatory barriers, and growing nationalist sentiment—threaten to slow that wave, if not bring it to a halt. In this, the second instalment of PwC’s <a href="https://www.pwc.com/gx/en/services/advisory/consulting/risk/top-risks-series.html">blog series on the top business risks of 2019</a>, we look at what threatens to stem the tide of innovation and what business—and government—can do to restore trust in technology and ensure that innovation both thrives and benefits society. </span></p><p><span style="font-weight: 400;">Not long ago, the possibility that anything could slow the breakneck pace of innovation seemed remote. But in the spring of 2018, the public learned that personal data scraped from social media was used to target various voter blocs with advertising and bogus news reports to influence the outcome of the 2016 U.S. presidential election. That news followed reports of data breaches at businesses ranging from credit-reporting agencies to major retailers to financial services companies, fuelling consumer concern about risks to privacy posed by digital technologies.</span></p><p><span style="font-weight: 400;"><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e20240a469e4f4200d-pi" style="float: left;"><img alt="Visuals for innovation risk blog 1 v1.0" class="asset asset-image at-xid-6a00d83451623c69e20240a469e4f4200d img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e20240a469e4f4200d-500wi" style="margin: 0px 5px 5px 0px;" title="Visuals for innovation risk blog 1 v1.0" /></a>The revelations sparked increased discussions in Washington and other capitals toward increasing regulation of the tech sector, in particular the gathering and use of consumer data—the raw material for innovation the digital economy. </span></p><p><span style="font-weight: 400;">Although some regulation, most notably the EU’s </span><a href="https://www.pwc.com/gx/en/issues/regulation/general-data-protection-regulation.html"><span style="font-weight: 400;">General Data Protection Regulation (GDPR)</span></a><span style="font-weight: 400;"> was already scheduled for implementation before the reports of electoral interference; the news and the subsequent public outcry accelerated momentum toward further limits on the amount and type of consumer data that is collected and how it is used. </span></p><p><span style="font-weight: 400;">It turns out that the executives who responded to PwC’s </span><a href="https://www.pwc.com/gx/en/ceo-survey/2019/report/pwc-22nd-annual-global-ceo-survey.pdf"><span style="font-weight: 400;">2019 Global CEO Survey</span></a><span style="font-weight: 400;"> had good reason to cite “over-regulation” as the leading threat to the growth of their organisations and the global economy.</span></p><p><span style="font-weight: 400;">The prospect of more stringent regulation is only one of several forces that is threatening to slow the pace of innovation. Eurasia Group’s report, ‘</span><a href="https://www.eurasiagroup.net/issues/Top-Risks-for-2019"><span style="font-weight: 400;">Top Risks 2019</span></a><span style="font-weight: 400;">’, cites two other prominent trends: security concerns that are ‘leading states to reduce their exposure to foreign suppliers in areas critical to national security’ and economic concerns that are ‘leading countries to put up barriers to protect their emerging tech champions against established market leaders from abroad’</span><span style="font-weight: 400;">. <sup>1</sup></span></p><p><span style="font-weight: 400;"> <a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e20240a469d6ff200d-pi" style="float: right;"><img alt="Visuals for innovation risk blog 2 v1.0" class="asset asset-image at-xid-6a00d83451623c69e20240a469d6ff200d img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e20240a469d6ff200d-500wi" style="margin: 0px 0px 5px 5px;" title="Visuals for innovation risk blog 2 v1.0" /></a>But companies are not helpless against the forces threatening innovation. Rather than wait for other stakeholders to act, business needs to get out ahead of the push for greater regulation and partner with the public sector to address legitimate concerns about privacy, data collection and use, and the social and economic impacts of technological advances. The more business engages with regulators—and the more successful they are in harmonising data protection regulations across jurisdictions—the more effectively they can guard against the risks of digital technologies without stifling innovation. </span></p><p><span style="font-weight: 400;">As part of that engagement, forward-thinking companies are already incorporating data security and privacy protection into everything from corporate strategy to product design. At some software-as-a-service companies, for example, data security engineers are part of every product design team, actively looking for weaknesses in the design, then addressing the flaws; they continue to test the software’s security throughout its lifecycle, often engaging outsiders to probe for vulnerabilities. And some companies have begun to cite their data security safeguards to differentiate themselves from the competition—witness Apple’s advertisements at the 2019 Consumer Electronics Show announcing that “what happens on your iPhone stays on your iPhone.”</span></p><p><span style="font-weight: 400;">Business, government and the public all benefit from harnessing advanced technologies and harmonising data protection regulations to address pressing business and societal problems while guarding against the risks posed by technology’s dark side. Together, they can ensure that data security and privacy protection don’t hamper innovation, but actually advance it. </span></p><p><span style="font-weight: 400;"><sup>1</sup>All quotes in this paragraph are from ‘</span><a href="https://www.eurasiagroup.net/issues/Top-Risks-for-2019"><span style="font-weight: 400;">Top Threats 2019</span></a><span style="font-weight: 400;">’, Eurasia Group 2019</span></p><p> </p></div></content> </entry> <entry> <title>Cracks in the façade: What divisive global politics means for business</title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2019/01/cracks-in-the-fa%C3%A7ade-what-divisive-global-politics-means-for-business.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2019/01/cracks-in-the-fa%C3%A7ade-what-divisive-global-politics-means-for-business.html" thr:count="0" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e2022ad3bb482e200d</id> <published>2019-01-30T15:24:10+00:00</published> <updated>2019-03-05T16:41:17+00:00</updated> <summary>The PwC blog series on threats to macroeconomic and revenue and profit growth kicks off with an introduction to the key findings of the 22nd annual PwC CEO survey, in particular regarding threats to stable business operations. It relates those threats to Eurasia Group’s latest report on the geopolitical risks facing companies that operate globally.</summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Demographic and consumer shifts" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Demographic and social change" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Economic Resilience" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Geopolitical risks" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Innovation" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Regulation and compliance" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Strategic risk management" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Supply chain management" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Technological Resilience" /> <category scheme="https://sixapart.com/ns/types#tag" term="CEO Survey" /> <category scheme="https://sixapart.com/ns/types#tag" term="digital risk" /> <category scheme="https://sixapart.com/ns/types#tag" term="economic decline" /> <category scheme="https://sixapart.com/ns/types#tag" term="economic growth" /> <category scheme="https://sixapart.com/ns/types#tag" term="Eurasia Group" /> <category scheme="https://sixapart.com/ns/types#tag" term="nationalism" /> <category scheme="https://sixapart.com/ns/types#tag" term="populism" /> <category scheme="https://sixapart.com/ns/types#tag" term="recession" /> <category scheme="https://sixapart.com/ns/types#tag" term="strategic risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="top risks 2019" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p><strong>By George Stylianides, PwC Global Risk Consulting Leader</strong></p><p>The ties holding together the international order have frayed badly in recent years. Debates that once seemed settled—around globalisation, trade and the free flow of information, goods and people—have erupted again with a vengeance, threatening to upend everything from global economic growth to corporate supply chains and sourcing strategies. Around the world populism and nationalist sentiment are on the rise, stoked by political leaders whose views and policies threaten to destabilize the pillars of international trade and development. In light of these trends, many business leaders have revised their growth estimates sharply downward, and the organisations they lead have turned inward in search of revenue growth rather than outward toward new markets and alliances. Ironically, those moves may hasten the onset of the recession that many business leaders see over the horizon.</p><p><br /><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3953a66200c-pi" style="float: left;"><img alt="CEO_Survey_Chart_ART_v7_Twitter_3" class="asset asset-image at-xid-6a00d83451623c69e2022ad3953a66200c img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3953a66200c-320wi" style="margin: 0px 5px 5px 0px;" title="CEO_Survey_Chart_ART_v7_Twitter_3" /></a>Executives’ newfound sense of caution is apparent in the responses to <u><a href="https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2019/us">PwC’s latest Global Annual CEO Survey</a></u>, which reveal sharp declines in business leaders’ optimism about global GDP growth and their own organisations’ revenue prospects in 2019 and beyond. The main threats to growth, according to CEOs, aren’t terrorism or climate change, both of which tumbled down the survey’s rankings of leading risks. The biggest worry points—over-regulation, trade conflicts and policy uncertainty—relate to the ease of doing business around the world. And just when CEOs are in pressing need of insightful analysis to inform their strategic decisions, they face chronic and growing shortages of skilled talent to extract value from the data inundating their organisations. Those results chime with the conclusions of a <u><a href="https://www.eurasiagroup.net/issues/Top-Risks-for-2019">recent top risks report</a></u> from the Eurasia Group, an advisor to investors and business leaders on political risks and opportunities in foreign markets.</p><p>The geopolitical crosscurrents discussed in both reports will have wide-ranging impacts on key business priorities. In a new blog series, PwC’s risk specialists examine how political forces are influencing business decisions. In this first instalment, we analyse CEOs’ views of the leading risks they face in 2019. In subsequent posts we’ll consider the state of relations between China and the U.S., the world’s two biggest economies; examine the effects of rising nationalism on supply chains and overseas operations; and review the threats to vitally needed innovation, which depends on the free flow of people and ideas across borders. We hope this blog will be of value to business leaders, helping them navigate today’s treacherous geopolitical seas.</p><p><strong>Rising tensions cloud the global outlook</strong></p><p><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3bb47f1200d-pi" style="float: left;"><img alt="CEO_Survey_Chart_ART_v7_Twitter_2" class="asset asset-image at-xid-6a00d83451623c69e2022ad3bb47f1200d img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3bb47f1200d-320wi" style="margin: 0px 5px 5px 0px;" title="CEO_Survey_Chart_ART_v7_Twitter_2" /></a>CEOs have seen the discord coming for a while. In recent editions of PwC’s Annual Global CEO survey, large majorities of respondents have consistently said the world is moving toward nationalism and devolved nations and fragmenting into regional trading blocs. Those trends are darkening business leaders’ views of their companies’ growth prospects and those of the overall economy. True, 42% of CEOs believe global economic growth will improve over the next 12 months. But 28% expect growth to decline, up from 5% the previous year—a record increase in the ranks of the pessimists. Their confidence in the growth prospects of their own companies over the next one- and three-year periods has also faded.</p><p>Respondents to our latest survey also reordered their rankings of the most significant threats to business. Terrorism, ranked as the second-most severe threat in last year’s survey, has fallen to 23<sup>rd</sup>, while threats related to government policy and performance have assumed new prominence. Over-regulation, policy uncertainty, trade conflicts, geopolitical uncertainty, protectionism and populism have muscled their way onto the list of the top ten threats that have CEOs feeling “extremely concerned.”</p><p>Those concerns are reshaping CEOs’ operating models and growth strategies. A near-majority (45%) of respondents who report they are “extremely concerned” about “trade conflicts” are adjusting their supply chains and sourcing strategies, and 25% are shifting their growth strategies to other territories. An additional 22% are delaying capital expenditures. CEOs of China-based companies have been far more active in making such adjustments than their U.S. counterparts.</p><p><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad39539fc200c-pi" style="float: right;"><img alt="CEO_Survey_Chart_ART_v7_Twitter_1" class="asset asset-image at-xid-6a00d83451623c69e2022ad39539fc200c img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad39539fc200c-320wi" style="margin: 0px 0px 5px 5px;" title="CEO_Survey_Chart_ART_v7_Twitter_1" /></a>Amid all the external turmoil, CEOs are looking inward for growth, with 77% of CEOs surveyed saying that their organisations are planning to reap operational efficiencies to drive revenue improvement; 72% are placing their faith in organic growth. Only 37%, by contrast, are looking to new markets to drive growth; the same percentage are banking on M&A.</p><p>Capability and talent gaps threaten to hinder that planned growth. For example, 94% of CEOs said that data about customers’ and clients’ preferences was “critical,” yet only 15% said the data they receive is “comprehensive.” What accounts for that yawning gap? Talent shortages are a key reason. Nearly two-thirds (62%) of CEOs surveyed say that it has become more difficult to hire workers in their industry, up from 42% in 2012, and 55% say that a lack of available talent has impaired their ability to innovate effectively. And 54% of respondents say that a lack of analytical talent is the primary reason that the data they need to make key business decisions is inadequate or that they do not receive that data.</p><p><strong>As the big powers face off, nationalism gathers strength</strong></p><p><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3953ac7200c-pi" style="float: left;"><img alt="Image 2 - Blog v1.1" class="asset asset-image at-xid-6a00d83451623c69e2022ad3953ac7200c img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3953ac7200c-320wi" style="margin: 0px 5px 5px 0px;" title="Image 2 - Blog v1.1" /></a>CEOs will see many of their concerns reflected in the Eurasia Group report titled “Top Risks 2019.” This sobering document declares that “the overwhelming majority of geopolitical developments that matter…are now headed in the wrong direction.”<a href="#_ftn1" name="_ftnref1"><sup>[1]</sup></a> Take the state of U.S.-China relations. Even if the two economic superpowers’ disagreements about trade and economic policy are resolved, the report states, “something more fundamental has broken in the relationship between Washington and Beijing that can’t be put back together.” The misgivings that marks the relationship has intensified as President Donald Trump’s foreign and economic policies have grown more confrontational. China’s response so far has been relatively muted and conciliatory, but with nationalism on the rise at home, President Xi Jinping and his government are under pressure to assume a more aggressive posture.</p><p>Meanwhile, Europe’s “populist and protest movements are stronger than ever,”<sup> <a href="#_ftn2" name="_ftnref2">[2]</a></sup> the report asserts. Elections to the European parliament will take place in May, creating “an opportunity for right-wing eurosceptics to become an imposing force in the parliament—perhaps the second-largest group.” Their presence will make it more difficult to reach consensus on key issues such as migration and trade and undermine attempts to react cohesively to economic or political shocks. As individual countries such as Austria, Hungary, Italy and Poland pursue go-it-alone strategies, supply chains could be disrupted, and local business and investment policies could make doing business on the Continent more difficult and complex.</p><p>Perhaps most ominously, the report’s authors say the world is headed toward “a global innovation winter—a politically driven reduction in the financial and human capital available to drive the next generation of emerging technologies.”<a href="#_ftn3" name="_ftnref3"><sup>[3]</sup></a> To discourage cyber mischief and industrial espionage, some countries are throttling foreign suppliers’ access to key industry sectors and tightening regulations over the use of consumer data. Protectionist barriers in some territories are rising as governments seek to advance local tech champions at the expense of established global giants. And more stringent immigration policies are inhibiting the flow of talent to key innovation centres. Each of these trends is manageable on its own; in concert they threaten “to cast a pall over global innovation.”</p><p>Such is the parlous state of the business world in 2019. In coming posts to this blog, we’ll take a closer look at how these developments will affect how business is done in the coming year and beyond. Hang onto your hats, it’s going to be a bumpy ride.</p><p> </p><p>_____________________________________________________________________________________</p><p><span style="font-size: 8pt;"><a href="#_ftnref1" name="_ftn1"><sup>[1]</sup></a> All quotes in this paragraph are from “Top Risks 2019,” Eurasia Group</span></p><p><span style="font-size: 8pt;"><a href="#_ftnref2" name="_ftn2"><sup>[2]</sup></a> All quotes in this paragraph are from “Top Risks 2019,” Eurasia Group</span></p><p><span style="font-size: 8pt;"><a href="#_ftnref3" name="_ftn3"><sup>[3]</sup></a> All quotes in this paragraph are from “Top Risks 2019,” Eurasia Group</span></p></div></content> </entry> <entry> <title>Risk and reward: How family businesses can tackle digital disruption </title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2019/01/risk-and-reward-how-family-businesses-can-tackle-digital-disruption-.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2019/01/risk-and-reward-how-family-businesses-can-tackle-digital-disruption-.html" thr:count="0" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e2022ad3acc50b200d</id> <published>2019-01-08T16:52:28+00:00</published> <updated>2019-01-11T13:17:20+00:00</updated> <summary>In the PwC Global Family Business Survey 2018 – involving over 2,900 respondents at companies mostly with annual revenues of US$21 million to $100 million – we found a marked increase in the number of businesses that felt vulnerable to digital disruption: 30%, compared with 25% in 2016, the last time we did the same survey.</summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Innovation" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Regulation and compliance" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Resilience" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Technological Resilience" /> <category scheme="https://sixapart.com/ns/types#tag" term="cybersecurity" /> <category scheme="https://sixapart.com/ns/types#tag" term="digital risk" /> <category scheme="https://sixapart.com/ns/types#tag" term="digital trust" /> <category scheme="https://sixapart.com/ns/types#tag" term="Family Business Survey" /> <category scheme="https://sixapart.com/ns/types#tag" term="governance" /> <category scheme="https://sixapart.com/ns/types#tag" term="Risk Assurance" /> <category scheme="https://sixapart.com/ns/types#tag" term="Risk Consulting" /> <category scheme="https://sixapart.com/ns/types#tag" term="risk management" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p>By Jim Woods, Global and China/Hong Kong Risk Assurance Leader, PwC China and Hannah Harris, Family Business Leader, PwC UK</p><p>Asking businesses what they think about digital disruption these days usually prompts some pretty interesting responses. But when PwC recently asked thousands of family businesses across 53 territories about the topic, what came back was striking.</p><p>In the <a href="https://www.pwc.com/gx/en/services/family-business/family-business-survey-2018.html">PwC Global Family Business Survey 2018</a> – involving over 2,900 respondents at companies mostly with annual revenues of US$21 million to $100 million – we found a marked increase in the number of businesses that felt vulnerable to digital disruption: 30%, compared with 25% in 2016, the last time we did the same survey.</p><p>However only a minority of respondents were able to talk about specific technologies. The threats perceived to be challenging their existing business models were more general, or referenced large tech companies such as Amazon, Google or Uber. </p><p>So, for example, when asked “In what ways do you think you are vulnerable to digital disruption? Which technologies in particular?”, what often came back was mention of a general threat like that of multinationals challenging the way in which family businesses sell their products, or a fear that an increasingly price-led marketplace might devalue their traditional strengths.</p><p>This tells us that while family businesses are starting to recognise the challenge of digital disruption, that doesn’t mean they are ready for it. In the case of cyber, specifically, the relatively high share of respondents saying they were not very vulnerable to cyber-attack (50%) was especially noteworthy.</p><p>It also tells us that for family businesses, the biggest existential risks to the business may well come from outside the core set of operations and priorities that family management has been used to dealing with for a long time – possibly even for generations.  For example, a family-run haulage business may be used to thinking about how fuel prices and engine emissions standards might affect operations. But what about driverless trucks and digital freight matching? </p><p>For family businesses, recognising and acting on the digital challenge – and other emerging risks – is especially important. Failing to do so may threaten the inherent brand and trust they will have likely built up over generations, factors that have been critical to their longevity and resilience.</p><p>So, what do family businesses need to do?</p><p>First, it pays to get skills and governance right. With increased threats comes a need to find the right talent to deal with them. Without the right team in place, managing risks around security, privacy and ethics becomes a much steeper climb. These hires may be completely different from the type of hires that a family business may have made in the past. Indeed, key roles such as chief information security officer, chief security officer, chief risk officer and chief data officer are often absent at many companies – not just family businesses, as we found in PwC’s latest <a href="https://www.pwc.com/us/en/services/consulting/cybersecurity/digital-trust/2018-insights.html">Digital Trust Insights</a> survey (formerly PwC’s Global State of Information Security Survey).</p><p>Family businesses should therefore think about how best to recruit outside their core industry. Digitally qualified people don’t necessarily need to be familiar with the business of that particular family-run company to be a good fit, although it certainly helps for such hires to understand how to navigate the challenges that are unique to the recruiting family business.</p><p>One thing that stands in family businesses' favour in this context is a sense of purpose. Business leaders are talking more than ever about finding the right balance between the profit motive and a heightened sense of purpose. Family businesses tend to have a strong sense of purpose, and this can be great as a recruiting tool.</p><p>Of course, it’s important not to lose that “family feel”. So, another focus when it comes to skills within the family can be on tech-savvy millennials. In our Family Business Survey 2018 we found that 69% of respondents expected or encouraged the next generations they hire – including their family members – to gain experience outside the family business. They recognise that no company has a monopoly on digital innovation, and it’s better to learn from a broad base of experience.  </p><p>In terms of governance, a strong combination of directors with the right skills can be hugely beneficial as family businesses look to tackle digitalisation. Family members who may be directors “around the family dinner table” may now need to accommodate new faces with specialist skills. Businesses may need to formalise new governance structures at the board level as a result. Cutting back on the number of people on the board will probably be inevitable, too. </p><p>There is no “one size fits all” solution, and family businesses each have their own unique characteristics. But it’s about building resilience in a digital world, so that one generation can confidently hand over a lasting legacy to the next generation. There could even be an opportunity for family businesses to leapfrog larger and more sophisticated competitors. Who knows what the responses might say when we next carry out our Family Business Survey in 2020?</p></div></content> </entry> <entry> <title>Ideas and inspiration from the 2018 RiskMinds Conference </title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2018/12/ideas-and-inspiration-from-the-2018-riskminds-conference-.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2018/12/ideas-and-inspiration-from-the-2018-riskminds-conference-.html" thr:count="0" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e2022ad3c6eab4200b</id> <published>2018-12-14T13:51:50+00:00</published> <updated>2018-12-14T13:51:50+00:00</updated> <summary>What's the RiskMinds conference really like? We sat down with George Stylianides, PwC’s Global Risk Consulting Leader and Global Risk and Regulation Platform Leader, to get his perspective on the 25th year of this pre-eminent risk and regulatory event. </summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Demographic and social change" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Economic Resilience" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Geopolitical risks" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Innovation" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Regulation and compliance" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Strategic risk management" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Technological Resilience" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Technology breakthroughs" /> <category scheme="https://sixapart.com/ns/types#tag" term="hot topics at the RiskMinds conference" /> <category scheme="https://sixapart.com/ns/types#tag" term="summary of RiskMinds conference" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p><a class="asset-img-link" href="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3a73e00200d-pi" style="float: left;"><img alt="2018-12-12_14-13-52" class="asset asset-image at-xid-6a00d83451623c69e2022ad3a73e00200d img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3a73e00200d-320wi" style="margin: 0px 5px 5px 0px;" title="2018-12-12_14-13-52" /></a><span style="color: #82393c;">What’s the RiskMinds conference <em>really</em> like?</span></p><p><span style="color: #82393c;">We sat down with George Stylianides, PwC’s Global Risk Consulting Leader and Global Risk and Regulation Platform Leader, to get his perspective on the conference—touted as the world's largest risk management event and attended by 650+ decision-makers from banks, buy-side, regulatory bodies and academia. </span></p><p><span style="color: #82393c;">In its 25<sup>th</sup> year, PwC is the principal sponsor of this pre-eminent event that attracts CROs from the world's top financial institutions</span>.</p><p><em>How did you have an opportunity to attend the RiskMinds and what’s it like at the event? </em></p><p>PwC is the official sponsor of the event and I’ve attended it now for the past ten years. You typically see many of the large financial institutions in attendance as well as technology companies that are there to showcase their latest applications aimed at helping organisations better manage risk.  It’s an occasion to mix and mingle with colleagues, to take the pulse of the banking industry, and to gauge what’s relevant to bank CROs.</p><p>Right now, I believe that financial institutions are finding themselves in a fundamentally altered risk and regulatory environment.  They’re trying to navigate a new competitive landscape with evolving business models.  RiskMinds presents an opportunity for risk leaders to connect with their peers to discuss current challenges around the use of technology, managing cyber-risk, and the consideration of societal risks such as climate risk.</p><p><em>Was there a highlight for you?</em></p><p>I’m always keen to see how emerging technologies —like AI and Machine Learning— are being leveraged by CROs to support compliance, control costs, and improve productivity. </p><p>Access to data is still a hot topic in the industry.  Data-sharing is often accomplished through an application programming interface (API), which allows for the flow of data between systems in a controlled yet seamless fashion.  These APIs have been leveraged in banking settings for years, however, with the breakthroughs in advanced analytics and traction of a number of non-banking fintech companies, APIs are receiving renewed interest as a means to enhance the delivery of financial services to both retail consumers and business customers. </p><p>PwC had the opportunity to showcase some of the financial risk solutions we’ve developed to help our clients specifically in relation model risk management and impairment provisioning. We introduced attendees to topics like Privacy and the impact of the EU regulation, General Data Protection Regulation (GDPR) and the implication of open banking pursuant to the Revised Payment Service Directive (PSD2) on bank business models. And, we are proud to say that this year 50% of our roster of speakers were female.</p><p><em>What were some of the most memorable sessions? </em></p><p>Boris Johnson, former Mayor of London and former UK Foreign Secretary, was invited to address attendees at a CRO breakfast and spoke about risk in politics.  Johnson is best known for his role in Brexit. In 2016, he became the leading spokesman for the “Leave” campaign in the run-up to the national referendum on whether the United Kingdom should remain a member of the European Union. </p><p>Johnson spoke about his perspective on taking risks, which is aligned closely with the ideology of Winston Churchill: great success always comes at the risk of enormous failure.  He spoke about the importance of politicians, like his hero Churchill, taking a stand against the establishment and “gambling” to do the right thing.  An interesting perspective on risk, to say the least.  In my opinion, Johnson is both flawed and fascinating.</p><p><em>Any surprises?</em></p><p>I was quite surprised to see that very few large banks seem to be prepared for how open banking can affect their businesses.  By “open banking” I mean the process by which banking data can be shared through secure open APIs so that customers—both individuals and businesses—can more effectively manage their wealth.  These open APIs would allow third-party developers to create additional services and tools.  The potential benefits of open banking are substantial: improved customer experience, new revenue streams, and a sustainable service model for traditionally underserved markets.</p><p>I believe that the future of banking is encouraging productive competition amongst financial service providers, sharing data securely and giving consumers more options when it comes to managing their wealth.</p><p><em>What’s next?</em></p><p>If I were to read the room a little bit here, my three key impressions after the conference are these:</p><p>First, I would say that many are cautiously optimistic in their outlook for 2019 and 2020.  The prospect of trade wars presents barriers to global growth, while higher interest rates and rising labor costs will also negatively impact both corporate profits and economic growth. I think we can anticipate slower growth in the months ahead, but growth nonetheless.</p><p>Second, financial institutions around the world are facing growing competitive pressure to make major strategic investments in technology, particularly in AI and machine learning, so look for that to continue and intensify.</p><p>And last, technology is fundamentally changing the physics of financial services. It’s weakening the bonds that have held together the various parts of financial institutions, opening the door to new operating models and ushering in a set of competitive dynamics that will reward institutions focused on the scale of and access to data and their ability to serve customers individually.</p><p> </p><p><span style="font-family: arial, helvetica, sans-serif; font-size: 8pt;">Photo courtesy of RiskMinds2018</span></p><p> </p></div></content> </entry> <entry> <title>The COSO ERM Framework one year later: What have we learned? </title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2018/10/the-coso-erm-framework-one-year-later-what-have-we-learned-.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2018/10/the-coso-erm-framework-one-year-later-what-have-we-learned-.html" thr:count="0" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e2022ad3991ac4200d</id> <published>2018-10-15T16:31:52+01:00</published> <updated>2018-10-15T16:31:52+01:00</updated> <summary>People want more of enterprise risk management (ERM) and are keen to know how the Framework might help them improve their own practices. Has the Framework changed the way you manage risk?</summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Best practices" /> <category scheme="https://www.sixapart.com/ns/types#category" term="COSO" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Regulation and compliance" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Strategic risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="COSO ERM Framework" /> <category scheme="https://sixapart.com/ns/types#tag" term="COSO Internal Controls Framework" /> <category scheme="https://sixapart.com/ns/types#tag" term="crisis management" /> <category scheme="https://sixapart.com/ns/types#tag" term="enterprise risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="ERM" /> <category scheme="https://sixapart.com/ns/types#tag" term="internal controls" /> <category scheme="https://sixapart.com/ns/types#tag" term="strategic risk management" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p>By Hélène Katz, former Director and Frank Martens, Global Risk Framework and Methodology Leader</p><p>Just over a year ago, the board of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its updated enterprise risk management framework (formally titled <em><u><a href="http://pwc.blogs.com/resilience/2017/09/the-top-changes-to-the-coso-erm-framework-you-need-to-know-now.html">Enterprise Risk Management: Integrating with Strategy and Performance</a></u></em>), followed in early 2018 by the supporting <u><a href="https://www.pwc.com/gx/en/services/advisory/consulting/risk/coso-erm-framework/podcasts/case-studies-that-illustrate-how-to-apply-the-principles-and-concepts-of-the-coso-erm-framework.html">Compendium of Examples.</a></u> Both of us were very fortunate to play central roles in helping to update and author these documents and have a vested interest in learning how they have been received in the market. Since the release of those publications, we have travelled around the globe, engaging with board members, company leaders, business people and risk professionals in more than 10 countries across five continents.</p><p>We were warmly received everywhere we visited, despite feeling some apprehension that we might be seen as roving provocateurs, boldly challenging strongly held local concepts of risk management frameworks and standards. Most of our risk colleagues were really just interested in what we learned and how they can improve their risk management. </p><p>Each country, of course, has its own distinctive culture and norms, but much of the feedback we heard, wherever we were, had strong points of commonality: People want more of ERM and are keenly interested in how the Framework might help them improve their own practices.</p><p>The flipside of this was that others believed that ERM had not delivered its promised value, despite their best efforts to change and improve. Case in point: one director who sits on three company boards told us, “If I cover up the logo at the top of the page, I can’t tell which company’s risk report I am reading.” But even those who expressed disappointment with ERM were eagerly looking for ideas about how to improve what they do. Half the people who responded to the informal survey we conducted as part of this process were already considering the role of risk in the strategy-setting process and exploring opportunities to boost the involvement of risk teams in that conversation. A slightly smaller percentage were exploring how to create more integrated risk and performance reporting.</p><p>When we drafted the Framework’s executive summary, we were careful to include a section on misconceptions about ERM, hoping to set the record straight. We did not entirely succeed. Many of those misconceptions persist among risk professionals, not least among those who cling to risk lists and heat maps as the go-to tools of their trade. We received a disheartening number of emails from people asking if we could share the new checklist. And then there were the folks who firmly believed that some form of maturity assessment was the answer. It isn’t. The way we see it, performing the same risk processes more frequently or introducing automation as a proxy for maturity will not meet the risk-management needs of any organization. Risk managers would better serve themselves and their organizations by weighing which practices will deliver greater value and benefits.</p><p>We also heard dispiriting comments at conferences and round-table meetings. There was, for example, the individual who asked us, “Are you saying that as a risk manager I need to understand my business?” Then there was the internal audit leader of a Fortune 100 company who said, “I don’t need to understand the strategy of the business to develop my audit plan—it’s not relevant to what I do.” And let’s not forget the risk manager who asked, “I have over a thousand risks in my risk register. What should I do next?”</p><p>We believe that risk management needs to serve the business and its stakeholders better. A long risk list that doesn’t connect to the business or its performance is not fit for that purpose.  Risk conversations are changing—we’ve seen and heard them in a variety of settings. And we have found some truly inspiring and delightful signs of progress. We heard from several organizations that had internalized the concept of risk curves and wrapped it into their thinking and vocabulary. We found organizations that were shifting their view of risk appetite, seeing it not merely as a compliance-driven evaluation exercise but instead as a way to expand their thinking when deliberating important decisions. Those organizations have learned—quite possibly the hard way—that by making more risk-informed decisions up front, they can more easily address evaluation concerns later. We also found organizations that were changing their strategic planning approach and engaging in projects that looked at their strategy-setting and risk-management practices in tandem. We also found a few whose risk reports to the board have evolved from a long, color-coded risk list to a narrative of how risks are shaping the entire business and its performance.</p><p>So what lies ahead?</p><p>One important lesson we took away from our travels was that though many organizations have begun their journey toward ERM, none of them started from exactly the same place. They picked one or two areas that were of most relevance for them.  If you are not yet sure where you might start, we offer a few suggestions:</p><ol><li>Have a candid conversation with your business partners about the value and benefits that ERM is delivering today and what they would like it to deliver.</li><li>Evaluate your current range of risk management practices and tools in light of their integration with strategy and performance.</li><li>Make a plan. Then execute it.</li></ol><p>A lot can happen in a year and we can’t wait to see what changes and developments the next 12 months will bring.  What are your thoughts?</p></div></content> </entry> <entry> <title>Why today’s CEOs need risk managers who can see around corners</title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2018/09/why-todays-ceos-need-risk-managers-who-can-see-around-corners.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2018/09/why-todays-ceos-need-risk-managers-who-can-see-around-corners.html" thr:count="0" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e2022ad391f97a200d</id> <published>2018-09-17T17:35:07+01:00</published> <updated>2019-01-03T16:09:18+00:00</updated> <summary>What explains the gap between CEOs’ positive outlook for the global economy and their less optimistic prospects for their own organizations?</summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Best practices" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Demographic and consumer shifts" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Demographic and social change" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Geopolitical risks" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Regulation and compliance" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Strategic risk management" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p><em>By <a href="https://www.linkedin.com/in/george-stylianides-49848210/" rel="noopener noreferrer" target="_blank">George Stylianides</a>, Global Risk Consulting Leader, <a href="https://www.linkedin.com/in/frankmartens/" rel="noopener noreferrer" target="_blank">Frank Martens</a>, Global Risk Framework and Methodology Leader and <a href="https://www.linkedin.com/in/h%C3%A9l%C3%A8ne-katz/" rel="noopener noreferrer" target="_blank">Hélène Katz</a>, Director, Risk and Regulatory</em></p><p>Take a look at the responses to two related questions in PwC’s <a href="https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2018/gx/business-threats.html">21<sup>st</sup> Annual Global CEO Survey</a>, and you’ll find an odd disconnect—and the possible sources of both the optimism and the anxiety permeating C-Suites around the world. Asked whether the global economy will grow in the coming 12 months, 57% of CEOs said they believed that it would, a big jump from prior years. But when CEOs were asked about their own companies’ prospects in the coming 12 months, only 42% said they were very confident of revenue growth.</p><p><a class="asset-img-link" href="http://pwc.blogs.com/.a/6a00d83451623c69e2022ad3b1a532200b-pi" style="float: left;"><img alt="Social media graphic for blog post v3 Facebook" class="asset asset-image at-xid-6a00d83451623c69e2022ad3b1a532200b img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad3b1a532200b-500wi" style="margin: 0px 5px 5px 0px;" title="Social media graphic for blog post v3 Facebook" /></a></p><p>What explains the gap between CEOs’ outlook for the global economy and for their own organizations?</p><p>We suggest that it indicates that CEOs have doubts about their organizations’ ability to anticipate and manage the manifold external risks confronting them. Moreover, we think, based on our own encounters with C-level leaders, that they are painfully aware that the markets are far less forgiving today of failures to anticipate risks than they used to be.</p><p>It used to be that investors would give companies a pass for, say, supply-chain troubles caused by an erupting volcano or earnings targets missed because of international trade disputes. Today, CEOs tell us, investors expect companies to be prepared for whatever circumstance throws their way, and if they’re not, well, it might be time for a new CEO.</p><p>As you’d expect, the most pressing external threats vary from region to region. Concerns over infrastructure are a major worry point in Africa and India, while CEOs in Europe and North America are preoccupied with geopolitical uncertainty, over-regulation, and rising cyber threats. And while cyber was amongst the top-five risks in North America and parts of Central Europe, it did not make the even make the top-ten in parts of Eastern Europe or South America, replaced by concerns over populism.<a href="#_ftn1" name="_ftnref1">[1]</a></p><p>For all their variance, those threats share a few commonalities, two in particular: the threats are external to the organization, and they can’t be managed adequately via controls and checklists alone. In a world where risks are in near-constant flux, yesterday’s static risk management techniques yield few insights to support strategic decision-making. What companies need in today’s unforgiving environment is a dynamic approach to risk, enabled by tools such as analytics and data modeling, and a focus not on reducing risks to zero but on resilience and the capacity to adapt to changing circumstances, whatever form they take.</p><p>That means that risk management professionals now need to view risk through a wide-angle lens and consider how the impact of specific threats might ripple through an entire organization. How should a company respond to, say, large-scale population movements driven by changes in climate? Risk managers will need to engage a wide range of functional and business-unit leaders in comprehensive strategic conversations touching on everything from supply chain redundancies to legal ramifications to workplace-safety concerns to distribution impacts. In simpler times, those conversations would have centered on strengthening controls and risk-mitigation measures. Today, though, those discussions have to focus on identifying and ranking each, as well as on developing the flexibility and resiliency necessary to withstand them.</p><p>Risk management professionals must also be prepared to contend with risks that were not even recognized as risks a decade ago. Consider the workforce of the future. Has the company prepared for a new normal of talent scarcities? Can risk managers define clearly what impact a prolonged dearth of key skills would have on business strategy? Can they spell out for the C-Suite (and investors) how the company’s recruitment and strategies are changing to keep pace with the workforce?</p><p>Not so long ago, such conversations were rare, if not unheard-of, occurrences. Today, with CEOs seeking reasons to temper their anxiety with optimism, they’re par for the course. Welcome to the new normal, where the ability to see around corners isn’t a special gift, it’s table stakes.</p><p><span style="font-size: 8pt;"><a href="#_ftnref1" name="_ftn1">[1]</a> PwC, 2018 Global CEO Survey</span></p><p>________________________________________________________________________</p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">More information about the changing role of the risk professional can be found below:</p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><strong>The Global Risk Podcast Series</strong>: 10-minute conversations designed to provide you with valuable insight and fresh perspective on how to manage risk in today’s challenging global landscape. Don’t miss an episode at <a href="https://www.pwc.com/globalriskpodcast" style="color: #000000; text-decoration: underline;">pwc.com/globalriskpodcast</a>.</p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Do you have the full picture of the potential risks facing your business and the capabilities you need to create advantage? Introducing the <a href="https://pwc.blogs.com/resilience/2018/06/coso-erm-framework-implementation-beyond-checklists-and-templates.html" rel="noopener" target="_blank"><strong>Compendium of Examples</strong></a>, a companion document to the COSO ERM Framework. </p><p> </p></div></content> </entry> <entry> <title>COSO ERM Framework Implementation: Beyond Checklists and Templates</title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2018/06/coso-erm-framework-implementation-beyond-checklists-and-templates.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2018/06/coso-erm-framework-implementation-beyond-checklists-and-templates.html" thr:count="1" thr:updated="2019-06-27T08:18:05+01:00" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e2022ad378fe06200d</id> <published>2018-06-14T16:26:39+01:00</published> <updated>2018-06-21T20:20:38+01:00</updated> <summary>The Compendium of Examples features nine case studies illustrating how organisations across industries, of different types and sizes, might choose to apply the principles and concepts of the COSO ERM Framework.</summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Best practices" /> <category scheme="https://www.sixapart.com/ns/types#category" term="COSO" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Strategic risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="Compendium of Examples" /> <category scheme="https://sixapart.com/ns/types#tag" term="COSO ERM Framework" /> <category scheme="https://sixapart.com/ns/types#tag" term="enterprise risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="strategic risk management" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p>The release of the <a href="https://www.pwc.com/us/en/risk-regulatory-consulting/coso-erm-framework.html">2017 COSO ERM Framework</a> changed the conversation about how companies consider the relationship between risk and value — from one that is typically only considered as an erosion to value to one that can, when properly embedded in an organisation’s DNA, lead to value creation.</p><p>In fact, I think it’s fair to say that this link — between risk, strategy and performance — is one of the defining features of the 2017 Framework.</p><p>But we also learned that once people began to use the new Framework, they wanted a bit more. </p><p>As part of our rollout, the team and I had the privilege of traveling around the world talking with risk professionals, C-Suites and boards about these new concepts of enterprise risk management. Invariably we were asked if there was a checklist, a step-by-step case study, or a template — some kind of road map for implementation.</p><p>While we wanted to give our colleagues practical tools for implementing these new principles, we were also wary of suggesting there was a standardised, or “official” method for doing so.</p><p><a class="asset-img-link" href="https://www.pwc.com/gx/en/services/advisory/consulting/risk/coso-erm-framework/podcasts/case-studies-that-illustrate-how-to-apply-the-principles-and-concepts-of-the-coso-erm-framework.html" rel="noopener noreferrer" style="float: right;" target="_blank"><img alt="Tile" class="asset asset-image at-xid-6a00d83451623c69e2022ad39aea59200b img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e2022ad39aea59200b-320wi" style="margin: 0px 0px 5px 5px;" title="Tile" /></a></p><p>After all, every organisation is unique to itself, to its industry, and to its operating environment. And risk management is as much an art as a science — in many ways it’s the <em>nuances</em> that are the most critical factors in both success and risk management.</p><p>So we decided that a far better method would be to offer illustrations that could illuminate the principles of our new ERM Framework.</p><p>For example: What are the types of benefits that you're seeking to derive from implementing ERM? What are the culture, capabilities and practices that you have to work with? And, based on those competencies, what is the most suitable approach for implementing its various parts?</p><p>I’m proud to share the result of all these conversations, interviews, and research into real-world industry practices. We call it the <a href="https://www.pwc.com/gx/en/services/advisory/consulting/risk/coso-erm-framework/podcasts/case-studies-that-illustrate-how-to-apply-the-principles-and-concepts-of-the-coso-erm-framework.html">Compendium of Examples</a>: nine examples that bring to life how organisations of varying types and sizes, across varying industries and jurisdictions, might choose to apply the principles and concepts of ERM.</p><p>In each example, the central character is an individual facing a typical business challenge — the launch of a new product, an investment decision, a resourcing challenge — the types of issues and decisions that businesspeople are facing every single day. These examples showcase how risk management — whether in culture, capabilities or practices — actually supports that decision making process… and leads to improved outcomes.</p><p>My hope is that risk professionals, boards and senior management alike enjoy reading the stories we’ve laid out — and that they spark innovation and creativity around how to weave enterprise risk management into the DNA of their own organisation.</p><p>As always, I love to know what you think <a href="https://twitter.com/DChesl">@Dchesl</a></p><p><a class="asset-img-link" href="http://pwc.blogs.com/.a/6a00d83451623c69e201bb0949a229970d-pi"><img alt="DChesley-cropped" class="asset asset-image at-xid-6a00d83451623c69e201bb0949a229970d img-responsive" height="96" src="https://pwc.blogs.com/.a/6a00d83451623c69e201bb0949a229970d-120wi" title="DChesley-cropped" width="85" /></a><br /><br /><a href="https://www.pwc.com/gx/en/contacts/d/dennis-chesley.html">Dennis Chesley </a>| Global Risk Consulting Leader<br /><a href="https://www.pwc.com/gx/en/contacts/d/dennis-chesley.html">Profile</a> | <a href="https://www.pwc.com/global/forms/contactUs.en_gx.html?CIF=WCD&localeOverride=en_GX&CN=Dennis++Chesley&CD=S3LWTFbzfgFSUkFweU8/K6xZpdjUYKgA9UIQRbEONM3aZqFO2X3gYXb55utBok7f&CC=&C=GX&L=en">Email </a>| + 1 (202) 316 5089</p><p> </p></div></content> </entry> <entry> <title>Taking the Wide-Angle View: The Changing Role of the Risk Professional</title> <link rel="alternate" type="text/html" href="https://pwc.blogs.com/resilience/2018/05/taking-the-wide-angle-view-the-changing-role-of-the-risk-professional.html" /> <link rel="replies" type="text/html" href="https://pwc.blogs.com/resilience/2018/05/taking-the-wide-angle-view-the-changing-role-of-the-risk-professional.html" thr:count="0" /> <id>tag:typepad.com,2003:post-6a00d83451623c69e20224e03c8738200d</id> <published>2018-05-25T17:28:23+01:00</published> <updated>2019-01-03T16:09:46+00:00</updated> <summary>Innovation and technology are changing the role of risk. So how do risk professionals now need to adapt? </summary> <author> <name>Tracy Fulham</name> </author> <category scheme="https://www.sixapart.com/ns/types#category" term="Best practices" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Innovation" /> <category scheme="https://www.sixapart.com/ns/types#category" term="Strategic risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="CEO Survey" /> <category scheme="https://sixapart.com/ns/types#tag" term="enterprise risk management" /> <category scheme="https://sixapart.com/ns/types#tag" term="Global risk" /> <category scheme="https://sixapart.com/ns/types#tag" term="PwC risk" /> <category scheme="https://sixapart.com/ns/types#tag" term="risk assurance" /> <category scheme="https://sixapart.com/ns/types#tag" term="risk compliance" /> <category scheme="https://sixapart.com/ns/types#tag" term="risk professional" /> <category scheme="https://sixapart.com/ns/types#tag" term="strategic risk management" /> <content type="xhtml" xml:lang="en-US" xml:base="https://pwc.blogs.com/resilience/"><div xmlns="http://www.w3.org/1999/xhtml"><p><span style="font-family: georgia,palatino;">By <span style="font-size: small;">Dennis Chesley, Global Risk and Regulatory Consulting Leader and global lead for the COSO ERM Framework update, PwC US and Brian Schwartz, US Internal Audit, Compliance and Risk Management - Financial Services Leader, PwC US</span></span></p><p><span style="font-family: georgia,palatino; font-size: small;"><span style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-size: small; font-style: normal; font-weight: 400; word-spacing: 0px; float: none; display: inline !important; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">What a difference a year makes. In 2017, respondents to PwC’s annual CEO survey identified over-regulation, uncertain economic growth, and exchange-rate volatility as the top threats to their businesses. Of considerably less concern were terrorism, cyber threats, and geopolitical uncertainty.</span></span></p><p><span style="font-family: georgia,palatino; font-size: small;"><span style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-size: small; font-style: normal; font-weight: 400; word-spacing: 0px; float: none; display: inline !important; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"> <a class="asset-img-link" href="http://pwc.blogs.com/.a/6a00d83451623c69e20224e03c8700200d-pi" style="display: inline;"></a> <a class="asset-img-link" href="http://pwc.blogs.com/.a/6a00d83451623c69e20224e03c8710200d-popup" onclick="window.open( this.href, '_blank', 'width=640,height=480,scrollbars=no,resizable=no,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0' ); return false" style="float: left;"><img alt="PwC-CEO-Blog-graphic" class="asset asset-image at-xid-6a00d83451623c69e20224e03c8710200d img-responsive" src="https://pwc.blogs.com/.a/6a00d83451623c69e20224e03c8710200d-320wi" style="margin: 0px 5px 5px 0px;" title="PwC-CEO-Blog-graphic" /></a><br /></span></span></p><p><span style="font-family: georgia,palatino; font-size: small;"><span style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-size: small; font-style: normal; font-weight: 400; word-spacing: 0px; float: none; display: inline !important; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">CEOs see a very different world in 2018, according to <a data-saferedirecturl="https://www.google.com/url?hl=en-GB&q=https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2018/gx.html&source=gmail&ust=1527180438497000&usg=AFQjCNEQShivKkfBf4JdzrJBnqABK9UKMQ" href="https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2018/gx.html" rel="noopener noreferrer" style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; text-decoration: underline; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px;" target="_blank">PwC's 21st CEO Survey</a>. As their confidence in both the health of the global economy and their own companies’ growth prospects has surged, they have downgraded uncertain economic growth to the 13<span style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-size: 11.66px; font-style: normal; font-weight: 400; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">th </span>most frequently cited threat in 2018, from the most frequently cited in 2017. And with the world’s leading economies growing more or less in sync, exchange-rate volatility has dropped from fifth to tenth. Over-regulation remains one of the top threats, but terrorism has vaulted to the second-most cited threat in 2018 from the 12<span style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-size: 11.66px; font-style: normal; font-weight: 400; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">th </span>most cited threat in 2017. And though concern about exchange-rate fluctuations has waned, geopolitical uncertainty has climbed to third position from fourth over the same period.</span></span></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><span style="font-family: georgia,palatino;">What we’re looking at here is what you might call a risk realignment. Macroeconomic and direct business risks have receded from the forefront of CEO concerns, while broad, complex political, and social concerns have grown markedly more prominent. The emergence of cyber threats in particular as a leading threat underscores the new challenges that risk professionals face. It also goes a long way toward explaining why their roles have to change in the years ahead.</span></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><span style="font-family: georgia,palatino;">The rising concern over cyber threats is no surprise, given the proliferation of cyber intrusions, data theft, and malicious manipulation of social media platforms. But the issue isn’t just the number of cyber threats but also their nature. Cyber threats are not a one-off event but continuous and constantly changing. That shape-shifting quality exposes the shortcomings of the traditional approach to risk management, which is to build higher walls, deeper trenches, and thicker doors. Cyberattacks usually impact a wide spread of business activities and functions, from product development to production to marketing, and from compliance obligations and regulatory relationships to reputation management and customer trust. As business grows ever more digital, risks will become ever-present rather than episodic. Senior management will expect risk management professionals to develop a dynamic understanding of cyber threats’ effect on every aspect of business and advise leadership on their potential impact on the organisation’s strategy.</span></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><span style="font-family: georgia,palatino;">The notion of the risk professional as strategic advisor is not universally accepted in the business world, or indeed even among risk management professionals. This point was driven home to us recently when a client’s chief risk officer told us that she didn’t know the company’s strategy and didn’t need to know it to do her job. That viewpoint is not uncommon, in our experience. It’s also an express ticket to irrelevance. Risk management professionals once spent their days preparing quarterly risk assessments and incident reports and performing internal audits. That’s no longer enough, if it ever was. Today’s CEOs and boards expect risk management professionals to know how various risks affect business performance. If they can’t meet that expectation, leadership takes notice. It’s no coincidence that only 53% of directors responding to PwC’s most recent board member survey said that management effectively communicates the risks of implementing a proposed strategy.</span></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><span style="font-family: georgia,palatino;">Tomorrow’s boards will expect risk management professionals to understand the links between innovation and risk, particularly those risks associated with artificial intelligence, robotics, and other technologies, and address the strategic ramifications of a failure to innovate. They will be expected to support the entire innovation cycle and offer a perspective on the potential risks and opportunities at every stage. Their work will require them to deploy an array of new skills, competencies, and tools to support innovation and identify and assess exposures and opportunities for the organisation. </span></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><span style="font-family: georgia,palatino;">As the findings suggest, there is a growing demand for risk management professionals who can take a wide-angle view of the business and understand how different and increasingly complex risks affect various activities and functions. To take that view they need business acumen and the soft skills necessary to advise their peers and persuade them of the virtues and vulnerabilities of a particular course of action. That’s not to say that risk management professionals don’t need technical skills as well, but those skills alone won’t be sufficient to meet the needs of the board and the CEO. The evolution of the role presents a challenge to risk management professionals, but also an opportunity. Historically, risk management professionals have been regarded within the organisation as wet blankets, forever saying ‘no’ to promising ideas. Now they have a chance to revise that view and demonstrate their value as strategic problem-solvers and enablers, helping the organisation meet its strategic goals and improve business performance. That sounds to us like a chance worth taking.</span></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><span style="font-family: georgia,palatino;">_______________________________________________________________</span></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">More information about the changing role of the risk professional can be found below:</p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">More information about the changing role of the risk professional can be found below:</p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><strong>The Global Risk Podcast Series</strong>: 10-minute conversations designed to provide you with valuable insight and fresh perspective on how to manage risk in today’s challenging global landscape. Don’t miss an episode at <a href="https://www.pwc.com/globalriskpodcast" style="color: #000000; text-decoration: underline;">pwc.com/globalriskpodcast</a>.</p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Do you have the full picture of the potential risks facing your business and the capabilities you need to create advantage? Introducing the <a href="https://pwc.blogs.com/resilience/2018/06/coso-erm-framework-implementation-beyond-checklists-and-templates.html" rel="noopener" target="_blank"><strong>Compendium of Examples</strong></a>, a companion document to the COSO ERM Framework. </p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><a href="https://www.pwc.com/riskinreview" style="color: #000000; text-decoration: underline;">Managing risks and enabling growth in the age of innovation: 2018 Risk in Review Study</a></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><a href="https://www.pwc.com/us/en/services/risk-assurance/library/internal-audit-transformation-study.html" style="color: #000000; text-decoration: underline;">Moving at the speed of innovation: 2018 State of the Internal Audit Profession Study</a></p><p style="text-align: left; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: Arial, sans-serif; font-size: small; font-style: normal; font-weight: 400; margin-top: 10px; margin-bottom: 10px; word-spacing: 0px; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><a href="https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2018/gx" style="color: #000000; text-decoration: underline;">The Anxious Optimist in the Corner Office: PwC’s 21<sup>st</sup> Annual CEO Survey</a></p></div></content> </entry> </feed> <!-- ph=1 --> 
