In the dynamic world of business, where risks are constantly evolving, companies are reevaluating their approach to risk management. Recent trends indicate a significant shift towards strategic risk management, with reputation risk taking center stage. According to a survey conducted by advisory firm Deloitte, 81 percent of companies are now explicitly managing strategic risk, signaling a departure from the traditional focus on operational, financial, and compliance risks.

The Rise of Strategic Risk Management

Deloitte’s survey, titled ‘Exploring Strategic Risks,’ delves into the strategies companies are adopting to manage the risks affecting their business strategies. This survey drew responses from over 300 senior top management and board members, representing diverse sectors and global regions. The key findings shed light on the changing landscape of reputation risk management:

  1. Reputation Risk Dominates: Reputation risk emerged as the foremost concern, reflecting the power of social media and rapid technological advancements that have made it challenging for companies to control their public image.
  2. Global Shift Towards Strategic Risk: An overwhelming 94 percent of respondents revealed a shift in their approach to strategic risk management over the past three years. This shift was particularly pronounced in Asia/Pacific (96 percent) and notable in Europe/Middle East/Africa (EMEA) (91 percent).
  3. Inadequate Risk Management Programs: In EMEA, almost half (49 percent) of companies describe their risk management programs as inadequate, compelling 91 percent of them to alter their strategic risk management approach.
  4. Top-Level Involvement: Strategic risk management is now a top priority at the CEO and board level, with 67 percent of surveyed companies reporting oversight by the CEO, board, or board risk committee.
  5. Impact of Technological Innovations: A majority (53 percent) of respondents believe that technology enablers and disruptors like social media, mobile, and big data could threaten their established business models. Consequently, 91 percent have adjusted their business strategies in response to these emerging technologies.
  6. Investing in Human Capital and Innovation: Looking ahead, businesses are gearing up for the future by investing in strategic assets. Human capital and innovation are identified as the top priorities for investment in the coming three years.

Embracing Change in Reputation Risk Management

These findings underline the importance of adapting to the evolving landscape of reputation risk management. Companies are no longer content with the traditional risk management approaches that served them in the past. Instead, they are using strategic risk management as a tool to make informed decisions, enhance their confidence in decision-making, and ultimately create greater business value.

As the business environment continues to change, staying ahead of reputation risk is crucial. Companies need to embrace technological innovations, invest in their human capital and innovation capabilities, and ensure that strategic risk management is a board-level priority. By doing so, they can navigate the challenges posed by strategic risks and safeguard their most valuable asset: their reputation.