Data breaches, climate change, geopolitical conflicts, global pandemics – businesses have had to navigate a growing number of complex risks over the past few years alone.
As the world continues to become more interconnected than ever before, a Chief Risk Officer (CRO) must expand accordingly. Across all industries, this means adapting your skillset to understand the holistic risk management needs that businesses now require.
Diverse and conflicting views
The rise of social media and online news has created a culture where misinformation is rife. During the COVID-19 pandemic, information that would once have been considered ‘fact’ was up for debate, and some newspapers, journalists and politicians were shown to be biased. In a world where ‘fake news’ has become a standard part of our vocabulary, CROs are in the precarious position of deciphering what is true, believable, and reliable.
This is why the CRO of the future must have the skill to pull together a corporate narrative that considers a variety of views and fosters a culture of risk awareness that goes beyond the rational or factual.
Being able to remove emotion, prejudice, bias, and agenda-setting that too often skews the motivation behind the information is the only way to guide organisations through the unique risks currently presented to them. Appreciating and recognising the diversity of views available while maintaining a clear, rational culture of risk management is imperative to successfully navigating the ever-changing world of risk management.
There has never been more pressure for businesses to implement corporate sustainability initiatives across the board. Issues such as climate change, food insecurity, and dwindling natural resources can present major challenges for companies, with a recent report finding that one in four organisations throughout the world are feeling the effects of climate change on their bottom line. While profitability remains a key consideration, it’s important for actuaries to consider all risks associated with these issues.
To mitigate sustainability and environmental risks, actuaries must understand how it affects all stakeholders, not just shareholders. This includes everyone from employees to customers, the wider community, and what’s in the public’s best interest. While mitigating the financial risk of climate change is important to maintain profitability, it’s also crucial that leaders consider how their sustainability choices will impact the reputation of the brand, customer loyalty, and the role they play in improving – or worsening – existing environmental concerns.
As organisations are forced to navigate the delicate balancing act that is corporate sustainability, CROs must be able to understand the intricacies of the problem and provide guidance towards a holistic solution.
Our world has never been more interconnected. The combination of technology, freedom of trade, and enhanced transportation allows businesses to operate and succeed on a global scale. However, it also exponentially enhances an organisation’s exposure to risk and requires actuaries to consider the issues that may arise in every market they cater to.
When operating on a global stage, everything from local regulations and laws to market trends, migration, economic uncertainty, social issues, and demographic factors come into play. CROs must be able to filter these risks appropriately, figuring out what they mean for an organisation despite being so far removed from potential threats. The ability to navigate different jurisdictions is imperative to safeguarding businesses from the varying degrees of risk that come with our intertwined global economy.
Threats to cyber security
In a world where business operations and technology go hand-in-hand, cyber security is one of the most important factors in any organisation’s risk mitigation plan.
Despite this, many organisations are still failing to properly consider the impact of cyber threats, with a staggering 43% of small and medium-sized businesses reported to not have any cyber security measures in place.
Looking at recent cyber security failures at some of Australia’s most prominent organisations highlights how the risk of cyber threats can result in unprecedented issues for companies of any size.
CROs must play a role in understanding and mitigating the threat of hacking and data breaches by understanding the cyber security landscape and helping organisations implement a management plan in the event of an attack. This is not only necessary to prevent or minimise issues such as reputational damage, legal issues, loss of customers, and huge financial ramifications but is vital to protecting customers from having their privacy compromised and identity stolen.
Artificial intelligence (AI) offers a wide range of incredible benefits to organisations around the world but, just like anything else, it also comes with its own set of risks.
Generative AI, such as ChatGPT, has become more accessible and businesses have begun to implement this technology on a larger scale. CROs are tasked with the duty of understanding what the potential impact might be if – or when – AI gets something wrong.
As AI is a relatively new phenomenon, actuaries will need to be adaptive and proactive when it comes to foreseeing any problems that may arise and how this can affect the wider organisation. For example, a company may begin using AI to provide customers with information or advice on a product or service.
In this scenario, it’s crucial that the organisation has a plan in place to reduce the risk of AI providing customers with wrong information that may affect the experience or well-being of customers. Keeping an eye on the AI landscape, understanding the way it evolves, and adapting the risk mitigation process to account for this is now a crucial skill for any actuary to master.
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