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Corporate Compliance Insights
Home Featured

Will Business Disruption Continue Throughout the 2020s? Survey Says: Fasten Your Seatbelts

Emerging Data Suggests Rapidly Changing Business Environment Anticipated

by Jim DeLoach
March 23, 2021
in Featured, Risk
bursting light bulb, concept of digital disruption

Five of the top 10 risks identified as “high impact” are operational in nature, while the rest are macroeconomic and strategic. What do they all point to? A decade of disruption, says Protiviti’s Jim DeLoach. He shares the Top 10 list revealed by a recent Protiviti and NC State University study and offers words of wisdom to guide your long-term planning.

Overall, almost 1,100 C-level executives and directors participated in this year’s global study, with 39 percent representing companies based in North America, 19 percent in Europe, 17 percent in Asia-Pacific and the remaining 25 percent from Latin America, the Middle East, India and Africa. Conducted after the November elections in the United States, the survey asked each respondent to rate 36 individual risk issues using a 10-point scale, where a score of 1 reflects “No Impact at All” and a score of 10 reflects “Extensive Impact” to their organization. For each risk issue, the average score reported by all respondents was determined and the risks rank-ordered from highest to lowest impact using the mean scores across respondents.

This year, in addition to a ranking of issues for the next 12 months, we asked respondents to rate the impact of the risks over the next decade looking forward to 2030. This resulting risk profile provides a context for understanding the most critical uncertainties over the next 10 years.

Overall, on a global basis, the top 10 risks for the next decade suggest a rapidly changing business environment and a need to prepare for the future. As executives peer ahead to 2030, five of the top 10 risks are operational in nature, but the top three risks are macroeconomic and strategic. The top 10 risks are:

  1. Adoption of digital technologies may require new skills or significant efforts to upskill/reskill existing employees
  2. Impact of regulatory change and scrutiny on operational resilience, products and services
  3. Rapid speed of disruptive innovation may outpace the organization’s ability to compete
  4. Leadership succession challenges and the ability to attract and retain top talent
  5. Privacy/identity management and information security
  6. Substitute products or services may arise that affect the business model
  7. Sustaining customer loyalty and retention may be difficult to achieve as customer preferences and demographic shifts evolve
  8. Ability to compete with “born digital” and other competitors
  9. Ability to utilize data analytics and “big data” to achieve market intelligence and increase productivity and efficiency as well as or better than competitors
  10. Cyber threats

A Decade of Disruption

These risks foretell disruption in the 10 years ahead. Further comments below explain why.

The future of work may be the defining opportunity and risk of the decade. When executives think a decade out, they are concerned that their organizations may not be able to upskill or reskill countless millions of displaced employees whose job junctions are obviated by widespread adoption of artificial intelligence (AI), automation in all its forms, natural language processing, visual recognition software, virtual reality simulations and other digital advances. The objective is to enable displaced employees to perform new job functions created by these same technologies that are essential to operating successfully in the digital economy. The fourth-ranked issue in 2021, the future of work topic, is the top risk theme for 2030.

Regulatory risk is elevated when viewed through the lens of a longer time horizon. The potential for regulatory change obstructing efforts to implement necessary improvements to operational resilience – and hampering products and services to compete successfully in the global marketplace – may be a concern now. But, relative to other risks, it is an even greater concern as business leaders look out over the next decade. This may be due to an expectation of environmental legislation, data privacy laws, tax increases, regulations driving social change and the impetus for developing alternative products and services.

Global leaders foresee a disruptive decade fueled by innovation that creates new markets and eventually disrupts existing markets, displacing established incumbents that fail to adapt. The third-ranked risk for 2030 is associated with the rapid speed of disruptive innovations. These might be enabled either by new and emerging technologies and/or other market forces outpacing an organization’s ability to compete without making significant changes to its business model. This risk was rated 18th for 2021 but jumped to the third-ranked risk for 2030. A trust-based culture made possible by authenticity at the top, acting with intention, committing to diversity and inclusion and fostering transparency will facilitate organizational resilience in the face of disruptive change.

The war for talent rages on in the third decade of the 21st century. The fourth-ranked risk reflects a long-term concern regarding the sourcing and retention of top talent needed to compete and thrive in a disruptive environment. Talent wins when positioned well to: re-imagine company market positioning, integrate emerging digital technologies into the business, execute complex strategies and reinvent business models that will sustain the organization’s relevance and growth over the next decade. This reality is triggering a related strategic concern that companies will not be able to keep pace with the rapid speed of disruptive innovation. It takes talent to do that.

No one expects data privacy and cybersecurity to diminish. Data privacy concerns promise to become only more complex in the digital age as requirements proliferate across the planet. Cyber threats remain a moving target as technology and the related threat landscape change. Ranked as the fifth and 10th highest rated risks for 2030 respectively, these threats, according to our study, are not going away as top-of-mind concerns.

Consistent with the disruptive theme, business leaders expect the emergence of substitute products or services that may affect the viability of the business model. Choices and alternatives for consumers are expected to expand over the next decade, creating uncertainty as to the continued viability of current product and service offerings. This represents the sixth-ranked risk for 2030. Substitutes typically offer similar benefits at a lower cost, with higher quality, in less time or with attractive convenience. They can also be transformational if they offer different, more appealing customer experiences. New market entrants with fresh and exciting value propositions can obsolete incumbent offerings, creating new sources of competition and lower prices in the marketplace. In some cases, substitutes may arise from regulatory developments, such as industries utilizing fossil fuels or manufacturing products that require fossil fuels. Again, it’s “disrupt or be disrupted.”

The overarching theme of unprecedented, accelerated change and disruptive innovations over the next 10 years may drastically alter customer behavior. Customer loyalty could prove to be fleeting as preferences and demographic shifts evolve. As noted above, new markets and competitors offering alternative products and services and different, more compelling value propositions are expected to expand customer choices in ways that could affect the viability of current business models and planned strategic initiatives. The seventh-ranked risk, this development, in turn, would erode the brand image and market share of incumbent organizations that fail to successfully pivot and adjust to change.

Building organizational resilience is an imperative over the next decade. There is an interesting overlap between the top 10 lists of risks for 2021 and 2030. The common risks for the near term and long term include the future of work, regulatory concerns, talent risk and cybersecurity and privacy issues, as discussed above. They also include the ability to compete with “born digital” players, the eighth-ranked risk for 2030. Thriving in a dynamic, unpredictable business environment requires a resilient and innovative culture. Clinging to the status quo is not a recipe for success. Authenticity of senior leadership, top talent with a high digital intelligence, effective utilization of data analytics (see below), a strong customer focus and a convincing commitment to diversity, equity and inclusion at the top and across the organization are all vital to building and sustaining the trust-based, innovative culture that can successfully navigate disruptive change and ward off the challenge of new market entrants.

Knowledge of markets and customers wins. The ninth-ranked risk for 2030 is an operational one. Leaders are concerned about having sufficient data analytics and “big data” skills to achieve needed intelligence to differentiate in the marketplace. One effective way to be counted as a “winner” in the disruptive ’20s is to focus relentlessly on the customer and have better data about evolving preferences and needs.

Senior executives and their boards may want to consider the above risks in evaluating their risk oversight and strategic and risk management focus in thinking long term. Disruptive change is a double-edged sword. It presents an opportunity to take a business to another level. Conversely, it can be a sign of the beginning of the end. Whichever side of the change curve management and the board find themselves, few would disagree that disruptive change itself cannot be taken lightly. The key is to embrace it as inevitable during what may become known as the “Disruptive Twenties.” As the new Amazon CEO Andy Jassy advised, “You can’t fight gravity.”


Tags: Business Continuity PlanningDEI
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Jim DeLoach

Jim DeLoach

Jim DeLoach, a founding Protiviti managing director, has over 35 years of experience in advising boards and C-suite executives on a variety of matters, including the evaluation of responses to government mandates, shareholder demands and changing markets in a cost-effective and sustainable manner. He assists companies in integrating risk and risk management with strategy setting and performance management. Jim has been appointed to the NACD Directorship 100 list from 2012 to 2018.

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