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Delivering Digital

CEOs Rank Disruption Risks Above Cyber, Regulatory Risks in 2019

Top executives and boards of directors say a lack of digital readiness is the top risk facing their businesses in the coming year

Enterprises executives say that 2019 will pose more global risks than in the past two years, and some of the top risks they face cluster around digital readiness.

In a comprehensive study of 300 top CXOs around the world, North Carolina State University’s (NCSU) ERM  Initiative and consulting firm Protiviti found that leaders of large organizations with legacy IT infrastructure and existing operations are struggling to compete against digital-native competitors. They list this as the No. 1 risk they face in 2019, trumping 29 other risk factors, including talent and leadership succession challenges, heightened regulatory risk, and growing cybersecurity concerns.

“Those organizations that have those embedded, traditional processes may not be able to compete in the marketplace as nimbly as some of those competitors that we refer to as ‘born digital,’” says Mark Beasley, Deloitte professor of enterprise risk management at NCSU and director of the ERM Initiative, explaining that these companies were built out of the gate with online, Internet-based delivery models. “That risk rose to the No. 1 spot this year.”

Other risks related to digital disruption and digital transformation made the top 10 list, too. This includes resistance to change operations, rapid speed of disruptive innovations and new technologies, inability to utilize analytics and big data, and sustaining customer loyalty and retention.

Researchers point out that the unifying factor across these risks is uncertainty. They recommend that enterprise risk management functions be involved in digital strategies to help organizations move in advance of disruption to offer greater stability to the business.

“In the digital economy, enterprise risk management can be a real difference maker if it contributes to reshaping strategy in advance of disruptive change,” says Jim DeLoach, managing director for Protiviti. “When the fundamentals of the business are about to change, executive management must be positioned to secure ‘early mover’ positioning in the marketplace to capitalize on market opportunities and emerging risks.”

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