2024's Risk Management Challenge: Navigating a Diverse Array of Crisis Events
The upcoming year is poised to set a new benchmark in the complexity and disruptiveness of crises, continuing a trend that has been challenging companies for years.
As the interplay between disruptive forces and their consequences intensifies, we can expect a cascade of interconnected challenges. Economic strains and extreme weather events are likely to fuel disruptive political landscapes, state instability, conflicts, evolving cyber threats, and a complex web of geopolitical shifts and regulatory changes.
Risk management teams are approaching a tipping point, burdened by escalating demands from various stakeholders, including boards, partners, customers, and employees. This comes at a time when organisations are striving to cut costs.
Moreover, the interconnected nature of risks adds layers of complexity to their assessment and management. For instance, geopolitical shifts drive a range of risks – political, regulatory, operational, security – each with potential reputational fallout. Yet, the responsibility for managing such risks is often unclear within organisations.
While technology has become a crucial tool in monitoring threats and mitigating risks, the rapid technological advancement among threat actors complicates threat identification, intent assessment, and perpetrator tracking, particularly in the cyber realm.
The solution lies in adapting risk management to a digital, fragmented, and rapidly evolving world, where risks defy simple categorization. Companies that adopt a holistic and dynamic approach to risk in 2024 will be better equipped to navigate this complexity and change. There’s a growing consensus on the importance of risk management, more so than in recent decades.
Now is the time to leverage this momentum. Risk management must utilise data and technology for efficient and effective intelligence gathering, threat assessment and monitoring, communication, and tracking of management and mitigation efforts. These tools should also be employed to evaluate the performance of risk management strategies.
However, a fundamental re-evaluation of risk management is also essential, focusing on company values, culture, ownership, responsibility, and accountability. Consistency and clarity in methodology are crucial, especially as many organizations have seen their risk management foundations shaken by the pandemic and subsequent crises.
Integration between risk management and key resilience departments, such as crisis management, is vital. Collaborative efforts in war-gaming, scenario forecasting, crisis management, contingency planning, and crisis exercises should be engaging, realistic, and sobering.
Most importantly, 2024 calls for a multi-disciplinary approach to risk management. In a world where risks can have multiple sources and impacts, a collaborative, cross-functional strategy is key to successful risk identification, assessment, and treatment. Overloading risk management functions is not a foregone conclusion.