Chief risk officers (CROs) said they were more involved in supporting their organisations’ short-term goals for innovation and growth rather than longer-term strategies, according to a study by the World Economic Forum.
For example, 81 per cent of CROs said that they were focused on exploring new partnerships and alliances for their organisations today, compared with only about one quarter involved in year-long strategies.
Even in areas such as new processes and technologies, and new products or service offerings, CROs mostly supported very short-term initiatives.
Role of risk functions
Yet CROs almost unanimously agree that they helped provide their organisations with a competitive edge. Most (76 per cent) agreed that their work was appreciated by the business’ leadership.
But there was also conflicting data. For example, almost half (47 per cent) agreed with the statement that the risk function could block innovations or growth initiatives based on its risk assessment.
While regulatory risk also ranked third in last year’s survey, the number of CROs saying it could have a severe impact on their organisations increased by 17 percentage points.
“The survey results show that risk is not universally seen as a strategic opportunity, indicating that more work is required within organizations to elevate the impact of the risk management function,” the report said. “While the risk function does already play an important role in shaping an organization’s innovation and growth strategy according to the survey results, this varies according to the type of strategy being implemented.”
Regulatory risk increases
Survey respondents said that the three key risks likely to impact their organisations were macroeconomic indicators (76 per cent), cyber-risk (71 per cent) and regulatory compliance (67 per cent).
While regulatory risk also ranked third in last year’s survey, the number of CROs saying it could have a severe impact on their organisations increased by 17 percentage points. This increase was connected to today’s more volatile political environment, said the report.
“Respondents highlighted how radical change ‘in response to geopolitical shifts, technological advancements and shifts in consumer demands’ creates a complex array of compliance requirements that businesses must navigate, the report said. “Surveyed chief risk officers asserted that such complexity (stemming from new regulatory requirements in key areas ranging from AI to corporate sustainability reporting requirements) was increasing business costs and dampening entrepreneurial enthusiasm.”
