Think risk, think opportunity, think business

Though most of us face risks, only some of them identify the opportunities presented by it and turn it into an advantage. Although the nature, frequency, degree and reach of risk may vary and evolve with time, what remains constant is the interconnectedness of risk and business, and the inevitability of more risks as a business develops and grows.

Now when something is known to be inevitable, it is best to accept it, work around it, preempt it, learn from it and move on, or like we say at PwC – predict, prepare and respond. However, there is another aspect to this strategy – embrace. If risks cannot be prevented or avoided, it is best to make them an ally, or use it as a source of inspiration and rethink one’s approach to risks.

Businesses that take pride in having one or many differentiators are the ones which have harnessed the opportunities presented by risk more than the others. Let’s take the example of ecommerce – a sector that juggles a multitude of risks ranging from technological, cyber and supply chain risks to economic volatility, regulatory changes, shift in consumer preferences and demand, limited access to finance, and the growing emphasis on ESG. How an ecommerce player responds to these risks determines a sustainable growth-oriented business and differentiates which brands will stay relevant and which are most likely to struggle with business continuity.

Most innovative organisations have seen the positive side of risk and used it to their advantage. This mindset provides the psychological safety net to dabble with trial and error, and to fail and move to the next experiment. Similarly, a robust, well-designed risk management strategy and architecture is one of the most strategic investments any business can make, and having this in place can significantly bolster the confidence and risk-taking abilities of an organisation.

Businesses that have become well-known brands have successfully tackled risk-related challenges, whether around product development, diversification of portfolio of services, market expansion, change in business structures, formats, operating models, and marketing. A forward looking risk management strategy lends credibility, builds trust and invokes confidence in a business. When a business takes its responsibilities towards all stakeholders seriously and does not compromise the safety, security and convenience, both online and offline, it establishes itself as a responsible business that is fit-for-future.

Risk has a perception problem and it triggers fear, uncertainty and avoidance in individuals and businesses alike. However, it should be viewed as a prompt for creating greater value and not something that requires amends or mitigation. It is a trigger to growth, a nudge for deeper thinking, a message for redirection, and a reorientation to try something new.

The crisis around Y2K established Indian IT companies as a name in the global IT market. Similarly, the COVID-19 pandemic and risks around costs, revenue and business continuity accelerated the digital revolution in India and pushed businesses to innovate and think of new ways to reach out to their customers. The pandemic also gave cloud service providers the nudge towards greater adoption that they were waiting for[RM(4] . Everyone who acted on the opportunities presented by the pandemic have accelerated their business growth by several years. An IMF blog highlights how the pandemic-induced digitalisation has proved to be a silver lining for many economies.

Without effective risk management, it is not possible to establish oneself as a value creator and in order to harness the true potential of risk, it is important to incorporate risk as a part of the strategy at the C-suite level. There is a need for business[PS7] leadership to change their[PS8] mindset around risk for successfully adopting and implementing risk as a part of their short- and long-term strategy.

It is equally important to view risk in a holistic manner. The interconnectedness of various kinds of risks is often not understood by businesses and risks are addressed in silos, just about managed and never considered as an opportunity to recalibrate their approach for overall business growth.

While having processes, governance, and frameworks in place is essential in managing risks, it is equally important to develop a risk adaptive culture within an organisation. Promoting this culture enables an organisation to identify and manage risks and helps them to seize opportunities provided by the disruptions.

Rethinking risk will enable business leaders to better align business objectives in a manner that evokes trust and delivers sustained outcomes for all stakeholders. Effective risk management is at the core of building resilient businesses and businesses need to develop this as a part of their short- and long-term strategy to become fit-for-future.

Author: Sivarama Krishnan, Partner & Leader- Risk Consulting, PwC India and Leader, APAC Cybersecurity & Privacy, PwC (Views are personal)