CHICAGO, April 4, 2022 – As employers in all sectors navigate a dynamic operating environment marked by a wide range of increasing and complex risks, many find their risk management function inadequately prepared to meet emerging challenges.
A new study of 229 risk management professionals conducted by leading risk and insurance software firm Origami Risk finds only one in four well-positioned to lead their entities through new and difficult exposures. Meanwhile, 12 percent appear to lack the skills, vision, technology, organizational support, or financial resources needed to manage risk proactively, make timely decisions and drive critical change.
“The combination of challenges posed by supply chain issues, the Great Resignation, natural disasters, and cyber threats has forced many enterprises to rethink existing business models and make dramatic overhauls in compressed time frames,” said Robert Petrie, CEO, Origami Risk. “While some risk managers are equipped to help drive or support these initiatives, others either don’t have the same status within their organizations or are struggling to keep up.”
Assessing risk management maturity. Conducted during the first quarter of 2022, the study involved a survey of risk executives in all sectors and in-depth follow-up interviews. Participants were grouped by their respective risk management maturity levels based on how they viewed their risk programs. Accordingly, only the top 27 percent were categorized as risk maturity “leaders” whose programs were either “optimized” (with internal collaboration and enhanced analytics) or “managed” (enterprise-wide engagement processes). Meanwhile, the bottom 12 percent viewed their programs as “ad hoc” or uncoordinated and were grouped as risk maturity “laggards.” The remainder of respondents (61%) fell in between these two groups.
Alignment of risk management with strategic objectives. While the study identified vast differences between the leader and laggard groups, one of the most telling findings between these two groups is that nearly half of the leaders rated their risk programs as a high priority, compared to only 15% of laggards. Furthermore, leaders were more aligned with organizational objectives than laggards, who trailed in that category by 26 percentage points.
When asked to rate their key organizational challenges, all participants gave nearly equal weight to organizational structure, budget, talent acquisition and internal alignment. Yet, leading and lagging risk managers had sharply different levels of concern about strategic organizational priorities. The majority of laggards had elevated concerns about these matters compared to leaders, whose programs were already aligned with these priorities.
There were also significant divides in how risk managers in the two groups approached various types of risks, as well as their ability to plan for and adapt to dynamic changes in their organizations’ operating environments and risk profiles.
Leading and lagging on supply chain risk. Although risk managers at both ends of the maturity scale appear equally concerned about supply chain risk, leaders are much further along in strengthening resiliency. More than half the leaders diversified suppliers in key regions or made similar refinements, but only 37 percent of laggards took these measures. One in four leaders added vendor scoring and analytics compared to 7 percent of those with lagging risk programs.
Generally, the survey found that while many risk managers in the laggard group are occupied with adapting to change and mitigating the financial impact of risk, leaders have the agility and wherewithal to pivot and focus on emerging threats, such as consumer/employee protection, operational disruption, and shifting regulatory requirements.
Leveraging technology for connectivity. The survey found that leaders are more actively investing not only in technology, but also in connecting various systems containing risk-related data to gain a more holistic view of risk.
Emblematic of resource issues facing lagging risk managers is their investment in technology and its utilization. Notably, they were 2.5 times more likely than other risk managers to lack a risk management information system, a valuable tool in analyzing risks across an enterprise, facilitating compliance, and driving efficiencies and continuous improvement. Further, 62 percent have no budget for technology investments in 2022.
Survey participants were somewhat split on whether their primary reason for not investing in connecting systems was due to lack of budget or because they felt comfortable with their current status.
Universal pursuit of ESG. The survey found a consistent focus on environmental, social and governance (ESG) programs among all groups of risk managers with fewer than one in five assigning a low priority to ESG. They were also equally concerned about aligning risk management with their ESG initiatives.
However, the leading and lagging risk management groups were split with respect to their implementation of diversity, equity and inclusion (DEI) initiatives. Among leaders, 80 percent have at least one foundational program in place compared to 48 percent of lagging risk managers. However, more than a third of the lagging risk managers indicated their organizations either have no DEI initiative in place or are taking a “wait-and-see” approach.
In addition to the survey findings, Origami Risk’s State of Risk report includes sections on emerging risks and perspectives of various industry thought leaders. To obtain a complimentary copy of the report, visit: https://www.origamirisk.com/resources/industry-reports/2022-state-risk-report-origami-risk.