Why boards want risk management to result in strategic opportunities

CFOs know a lot about risk management, and those serving on corporate boards might want to take the lead in that area. 

The majority (79%) of 510 board members at organizations with greater than $1 billion in revenue said, over the next five years, improved risk management will be critical to both protect and build value, according to EY’s Global Board Risk Survey released today. Why? EY points out that not only did the COVID-19 pandemic create risk, but it has also accelerated risk in areas including supply chain — think global semiconductor chip shortage—and even cybersecurity attacks, for example.

Although 83% of board members said the impact of market disruptions is increasing—just 18% believe that their organization has highly effective disaster response and contingency planning. However, 64% of respondents said their organization can manage traditional risks, such as changes in regulation.

But areas of risk can also open doors to greater opportunities, according to the report. The directors named changing consumer habits and technology disruption as top strategic opportunities, and companies are making that pivot. For example, in a recent conversation about Prudential Financial’s enterprise-wide transformation, CFO Ken Tanji told me the pandemic has both accelerated the company’s capabilities in using automation in underwriting life insurance policies and has made consumers more receptive to using the technology. 

So, how can organizations become more effective in risk management? EY’s report offers the following tips:

– Assess risk and strategy through a long-term lens. When scenario planning, 43% of risk management leaders look more than five years into the future; and 28% look ahead five years when setting their organization’s business strategy.

-Align risk management priorities with business strategy to create strategic opportunities. About 55% of board members said risk management “often struggles to keep pace” with business strategy changes.

– Focus on emerging, atypical, and external risks. Just 39% of board members said their organizations are prepared. 

But to effectively use this tips, an organization must adopt a data and technology-driven approach to risk management, according to EY. That means legacy systems with data quality issues may hold a company back.

---

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

****

Nominate superstars for consideration for Fortune’s annual 40 under 40 ranking of the most influential young people in business. The deadline is July 19. Click here for more information.

Big deal

A new research study commissioned by Billtrust, a B2B accounts receivable automation and payments provider, found that there's a perception gap among accounts receivable practitioners in the U.S. regarding how their processes are modernized. About 86% of respondents rated their departments as very or somewhat modernized. But only 7% said their organization's invoices and payments are electronic. The data is based on interviews and an online survey of more than 350 companies.

Courtesy of Billtrust

Going deeper

A recent survey by Indeed of 5,000 U.S. adults ages 18-64 found that only about 10% of respondents said they were urgently looking for employment. Hiring during the summer may be "sluggish" for employers. However, the lack of urgency appears to be temporary and may ramp up in the fall with the return to school and the further decline of COVID-19, according to Indeed. 

Leaderboard

Vikas Mehta was named CFO at Anaplan, Inc., a cloud-native platform provider, effective July 19. Most recently, Vikas served as CFO of Nike’s direct business leading both digital and the direct-to-consumer transition. He has also held leadership roles at Microsoft, Walmart eCommerce, eBay, and Autodesk.

Ed Tang was named CFO at Pindrop, an information security company that analyzes phone calls to detect risk, effective immediately. Tang succeeds the position from Jeff Hodges. Since 2019, he has served as the CFO of Lever, a talent acquisition platform. Tang also served in leadership positions at Salesforce and Box. 

Overheard

“This is a year of inflation.”

—Conagra CEO Sean Connolly on the rise of food prices, as reported by Fortune.