In today’s rapidly evolving business landscape in the MENA region, risk management has emerged as a critical part of strategy for organizational success. Project Management Institute (PMI) identified several megatrends — technological change, economic and demographic shifts and climate and diversity initiatives — that are driving the need for a broader approach to risk management.
How can organizations respond to these forces, while continuing to pursue the growth and innovation that will keep them competitive?
These companies have a strong risk culture. Organizations with strong risk management practices are twice as likely to anticipate significant revenue growth and five times more confident in their ability to deliver on outcomes, according to PwC’s research.
PMI sheds light on key highlights from their latest report, offering insights into the benefits and strategies for building a strong risk culture.
Developing a Strong Risk Culture
The report underscores the pivotal role of a strong risk culture within organizations. Companies with well-entrenched risk management practices are not only twice as likely to anticipate significant revenue growth but also five times more confident in delivering successful outcomes. To develop a strong risk culture,
- 70% are prioritizing diversity in risk teams.
- 56% are investing in risk culture and considering behavioral risk within their organizations.
- 47% are very confident in their risk structure’s ability to build a more risk-aware culture that can identify both the positive and negative sides of risk.
- 39% are making better decisions and achieving sustained outcomes by consulting with risk management experts early in the process.
- 22% are realizing benefits from defining or resetting risk appetite and risk thresholds.
Mitigating Risk: Trends to Watch
Knowing which threats are most likely to emerge can help companies adapt their project portfolios and help project professionals manage and mitigate risks on initiatives. Here are the issues generating the most concerns for CEOs — now and in the future:
PMI report highlights the challenges faced by executives in keeping pace with digital transformations, emphasizing the necessity for organizations to adapt to these megatrends.
Strengthening Organizational Resilience for Long-Term Growth
Strategic risk management serves as a catalyst for organizational resilience and long-term growth. Resilient organizations demonstrate the capacity to anticipate, absorb, recover from, and transform in response to internal and external pressures. The report suggests that organizations prioritize environmental, social, and governance (ESG) initiatives to address concerns:
- 48% of executives express concerns about cybersecurity resilience.
- 40% highlight worries about company working conditions.
- 37% note increasing regulatory and disclosure requirements.
- 28% cite a lack of ESG expertise and resources as a concern.
Opportunities and Strategies in Risk Management
Risk management isn’t merely about identifying problems; it’s a gateway to spotting opportunities.
Adidas’s strategic risk management efforts, for instance, highlight the positive outcomes that can arise from a proactive risk mindset.The company created a supervisory board to continually assess risks and opportunities and share insights biannually with an executive board.
The benefits? C-suite members can balance probability against potential financial impact — then signal to risk owners how they can mitigate appropriately.
The Role of AI in Sharpening Risk Management
Artificial Intelligence (AI) emerges as a powerful tool in enhancing risk management. AI tools can analyze large datasets, identify patterns, and offer valuable insights. They can reduce cognitive biases and provide real-time analysis, as exemplified by Shell’s use of AI to increase supply chain visibility and Boeing’s implementation of digital twin models for improved project outcomes.
The report highlights 65% of CEOs plan to increase spending on risk management technology, focusing on:
- 75% on data analytics
- 74% on process automation
- 72% on technology to support the detection and monitoring of risks.
Pro Tips for Building a Strong Risk Culture
1. Use data: Align internal and external data usage with strategic objectives and establish processes that proactively prioritize and address risks based on data.
2. Measure the impact: Risk management should be a key performance indicator for middle and senior-level managers, establishing a culture of accountability.
3. Talk it out: Discussing risks openly ensures risk management is at the forefront of the enterprise’s and project professionals’ minds.
4. Plan for the worst: Creating contingency plans (and budgets) for major disruptions eases the impact and provides a competitive advantage.
Four Ways to Stay Ahead of Unknown Risks
1. Watch out for ripples in the ecosystem: Stay on top of current events to identify possible risks and trends in real time through social media, trend reports or news sites.
2. Turn data into strategy: Use analytics tools to track everything from economic indicators to customer sentiment and align decisions with the company’s risk appetite.
3. Ask the experts: Engage with variety of stakeholders and specialists to determine which activities and trends merit attention.
4. Map it out: Conduct scenario planning to understand how trends might impact an organization and its initiatives, enabling teams to anticipate the need to pivot.
As companies navigate through the complexities of technological advancements, demographic shifts, and global initiatives, a robust approach to risk management becomes imperative. Readers can access the full report for free in Arabic or English, here: https://www.pmi.org/learning/thought-leadership/resilience-and-risk-management.