Disruption is a constant, but preparedness doesn’t have to be a guessing game. Klaus Jaeck of management consultancy Horváth USA outlines how organizations can strengthen their risk and compliance frameworks through advanced tools and cross-functional integration.
The pandemic fundamentally changed how global businesses view risk: Disruptions are no longer isolated anomalies but rather a constant stream of interconnected events. From worldwide supply chain issues during Covid-19 to extreme weather events and the 2024 dockworkers’ strike, organizations are continually reminded of the fragility of global operations.
Are we evolving alongside this seismic shift? A wide swath of companies continues old habits, reacting to crises rather than preparing for them. As threats to operational continuity grow more complex, the overall approach must change. There is real opportunity to create a clearer risk and compliance picture that leads to increased resilience and business confidence.
Anticipating the unforeseen
At the heart of effective disruption preparation is proactive risk management. This begins with an emphasis on risk transparency, achieved through advanced GRC frameworks. By consolidating risk data across departments and standardizing assessment methodologies, organizations gain a comprehensive and real-time view of their risk landscape.
Advanced tools like AI and data analytics are becoming essential in identifying risks before they escalate. These early-warning systems act as sentinels, monitoring critical factors such as geopolitical trends or supply chain vulnerabilities. For instance, by identifying potential disruptions in international trade routes, a company can secure alternative suppliers or transportation methods before a crisis unfolds, transforming uncertainty into a manageable challenge.
Once risks are identified, the next step is to assess and prioritize them effectively. Standardized criteria and methodologies provide a consistent framework for evaluating threats, allowing organizations to focus their resources on the most pressing issues. This structured approach not only prevents the misallocation of efforts but also ensures that critical risks are addressed with urgency, leaving less significant concerns to be managed appropriately without derailing larger strategic goals.
To further prepare for potential disruptions, leading companies also invest in scenario-based simulations. These exercises model hypothetical challenges — such as a widespread labor strike or a targeted cybersecurity attack — and enable organizations to stress-test their responses and refine their contingency plans.
By combining early detection, careful prioritization and realistic scenario planning, proactive risk management fosters a culture of resilience.
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Read moreDetailsCross-functional integration: breaking down silos
Risk and compliance can no longer operate in isolation. Aligning operational, financial and strategic risks enables organizations to create a unified and cohesive response to challenges, fostering collaboration and shared accountability. This holistic approach strengthens risk management and enhances the company’s ability to achieve broader objectives.
Increased transparency allows teams to identify vulnerabilities before they escalate into larger problems. An enterprise-wide view might reveal, for example, that a cybersecurity threat flagged by IT also poses significant financial risks or potential disruptions to operational continuity. Aligning insights from IT, finance and operations ensures a response that addresses every facet of the issue.
Such cross-functional collaboration drives continuous improvement. When different departments share insights and best practices, they collectively enhance an organization’s ability to adapt and innovate. Over time, this integrated approach builds a culture of resilience, with risk awareness embedded in daily decision-making.
Better technology, better compliance
Compliance, once considered a regulatory checkbox, is now a strategic enabler. The integration of AI, advanced analytics and automation helps companies optimize performance, while a robust GRC framework serves as the backbone of this evolution. The result is more centralized risk and compliance data that provides maximum visibility and agility.
Another significant improvement can be achieved through automation. Compliance tracking and reporting, once labor-intensive tasks, are now streamlined through advanced technologies. Automated systems ensure that organizations consistently meet regulatory requirements, adapt to evolving standards and provide transparent, reliable reporting.
When companies embrace data-driven compliance, they go beyond simply meeting obligations — they position themselves as agile, proactive organizations that turn compliance into a powerful tool.
Building strength in the face of disruption
By prioritizing risk transparency, resilience and cross-functional integration, companies can transform disruption preparedness into a competitive advantage. A well-executed GRC framework not only safeguards against threats but also creates opportunities for growth and innovation.
To work toward a high-performing risk function, companies should build around five key elements:
- Risk-bearing capacity is the maximum risk an organization can absorb without threatening financial stability or operations. Accurate assessments help prevent overexposure, ensuring stability and resilience even in adverse scenarios while enabling focus on growth.
- Risk/opportunity-adjusted planning integrates risk and opportunity assessments into strategic planning to create resilient strategies. This approach aligns goals with risk management, ensuring organizations mitigate potential downsides while capitalizing on opportunities.
- Scenario-based simulations use analytical tools that model hypothetical risks, such as economic downturns or operational disruptions. These simulations help identify vulnerabilities, develop response plans and maintain performance under adverse conditions.
- Risk-return management balances the risks and returns of decisions by optimizing opportunities that align with strategic objectives. This process enhances performance by maximizing returns while minimizing unnecessary risks.
- Liquidity and cash optimization manages cash flow and liquidity to ensure financial resilience. Practices like stress testing, maintaining liquidity buffers and enhancing transparency ensure stability, enabling organizations to meet obligations and seize growth opportunities.
Business confidence in action
In an interconnected global economy, disruptions can stem from sources as diverse as natural disasters, economic downturns or cyber attacks. True resilience extends beyond the ability to bounce back from such crises — it involves anticipation, adaptation and transformation.
Indeed, successful companies are not the ones navigating calm waters; they are the ones that face their risks head-on. The right combination creates business confidence, which empowers companies to make bold decisions, invest in new ventures and adapt to changing market conditions.
One global retail and services leader capitalized on this approach to gain a clearer line of sight into opportunities that emerge from risk. Triggered by the outbreak of the war in Ukraine, the company started a project focused on analyzing its risk inventory, creating guidelines for risk quantification and aggregation and conducting a tool-based analysis of key risks. These tools allowed them to identify changes in their risk profile at an early stage, derive and evaluate appropriate countermeasures and better predict the outcome of strategic decisions based on sophisticated scenario models.
The team assessed its dependency on China as a procurement market as one of their key risks and modeled paths to a more diverse supply chain. The exercise showed they could reduce imports from China by 40%, in turn, leading to a reduction of risk reserves of $600 million and a potential increase of 0.5% EBIT based on better pricing strategies and reduced transportation cost.
As disruptions become more frequent and complex, the companies that thrive will be those that embrace risk and compliance as dynamic, strategic tools that contribute to business confidence. These forward-thinking organizations will be better positioned to confidently navigate uncertainty, seize emerging opportunities and achieve sustainable long-term success.
Klaus Jaeck is a risk & compliance excellence partner at management consultancy at Horváth USA.He formerly served in risk roles at IBM and PwC. 
