If risk management functions at companies fail to maintain "digital fitness," they can become obsolete, especially in a digitally transformative business environment, according to an annual global report by PwC.
Brian Schwartz, a PwC partner who oversees the firm's U.S. governance, risk, and compliance enablement solutions, said that the highest-performing risk functions were in lockstep with their organization's digital transformation. They were effective because:
- They are more confident in taking risks. Dynamic risk functions feed in more appropriate data that aids in decision-making, said Schwartz, the primary author of the Risk in Review Study.
- They more effectively manage transformation-related risks. Examples of these types of risks include cybersecurity and data governance.
- They achieve a higher return on investment from digital initiatives. A digitally fit risk function can help companies "quickly evaluate whether the digital initiatives are paying off and ultimately give the company better ROI," Schwartz said.
John Merino, the chief accounting officer at FedEx Corp., said in the report that being more digital helps a risk function be more responsive and engaged. "It allows comparison and correlation of things that traditionally didn't connect in a way that is very provocative and powerful," he said.
For example, a company that uses software specifically for governance, risk, and compliance (GRC) can have all functions of a company entering findings into a GRC portal, where data can be turned into risk insight and analysis. "Using digital tools helps you to see the full picture of what's going on," Schwartz said.
Companies also are sharing that information with stakeholders. The report showed that 82% of the highest-performing companies use digital dashboard or visualization tools for comprehensive and strategic risk reporting to the board.
On the talent front, the PwC report recommends that companies:
- Assess the risk function's current talent to identify gaps.
- Invest in data science skills.
- Consider outsourcing talent to accelerate digital fitness.
- Upskill or recruit resources to serve as data analytics citizen developers while training the broader team as citizen users.
The report used responses from more than 2,000 executives in 99 countries.