The unprecedented rate of change, both in technology and the way businesses and consumers respond to it, puts organisations under pressure to innovate. While innovation offers the potential for progress, market differentiation and competitive advantage, it also presents new risks.
A recent 2018 risk review study asked organisations how confident they were in the ability of their risk management programme to effectively manage risks associated with new technologies. Only 10% of participants were extremely confident that their organisation’s risk management would be able to manage these risks effectively; 39% were quite confident, and 51% were not confident. While innovation is not limited to technology, technology is a catalyst for new ways of thinking and working as well as new products and services, all of which impact risk profiles and risk factors.
Failure to innovate can also pose its own risks. Our recent report, Innovation explored, included the example of Blockbuster Video being eclipsed by Netflix, as it did not anticipate or adapt to the pace or extent of change. This was a strategic failure because “a well-adjusted risk-management framework should be capable of evaluating both the upside and downside risks,” including failed innovation initiatives. “But precisely because innovation implies looking at your organisation through a new lens, standard risk assessment frameworks may not fit. It may be necessary to draw up a new framework.”
Risk management itself is an opportunity for innovation. In Raconteur’s recent supplement published in The Times, Sophia Brooke highlights how predictive analytics are helping companies use data to identify market trends and produce accurate forecasts of customer and competitor behaviour to help them identify future opportunities, challenges and risks.
Predictive analytics involves identifying the type of insights an organisation seeks to gain, creating a hypothesis and testing it on relevant datasets to uncover trends, opportunities and risks – including potential market challengers. Ironically, the results do not always meet expectations. As Brooke’s piece notes: “Be ready to have your ideas challenged by data and accept that sometimes the obvious logical outcomes are not supported by reality.” This methodology can also help organisations harness future trends in order to hedge risks and stay ahead of the game.
“The extremely competitive marketplace is pushing companies to find new ways to get ahead of their peers and to rely more on data than on hunches or on simply carrying on business as usual.”