Certain kinds of risks, if left unaddressed, inhibit organizations’ capacities to deliver on strategic targets. Particularly noteworthy are the crucial relationships between such risk areas as talent, culture, innovation and technology, which prompt further inquiry into how these areas intersect: What culture attracts top talent? What talent is needed to be agile, competitive, nimble and successful the digital age? What mix of culture and technology allows innovation to thrive?
Protiviti and NC State University’s ERM initiative annually survey boards of directors and C-suite executives about risks on the horizon for the upcoming year. I recently joined Pat Scott, Executive Vice President at Protiviti, Jim DeLoach, a Protiviti Managing Director and ERM expert, and Jonathan Wyatt, Managing Director and leader of Protiviti Digital, on a webinar to discuss the most recent 2020 Executive Perspectives on Top Risks report and the risks on the minds of leaders this year.
Taking risks means more than introducing new products or services or entering new markets. It entails innovating to disrupt business models, reimagining processes, and even reinventing the organization itself. In the digital age, it’s imperative that leaders foster the culture and attract the talent to incubate the initiative, creativity and innovative digital thinking that will drive their organizations’ ongoing commercial success.
Two of the top ten risks this year have implications related to the organization’s ability to attract and retain top talent:
- Succession challenges; ability to attract and retain top talent
- Adoption of digital technologies may require new skills or significant efforts to upskill/reskill existing employees
Two additional top ten risks this year present implications related to organizational culture:
- Resistance to change operations
- Organization’s culture may not sufficiently encourage timely identification and escalation of risk issues
And three more of this year’s top ten risks have implications related to the organization’s ability to embrace and manage technology and innovation:
- Ability to compete with “born digital” competitors
- Cyber threats
- Privacy/identity management and information security
For Many, Technological Innovation Is Not Optional
To take advantage of innovative technologies such as artificial intelligence, machine learning and advanced automation requires access to some of today’s rarest and most highly-valued skill sets. Therefore, concerns related to talent and culture are of particular interest to organizations that seek to integrate the most innovative new technology with their strategies.
Some industries – like financial services, which rely on technological innovation to enable features, create internal efficiencies and manage compliance obligations – are experiencing these impacts more intensely than other industry sectors. Failing to keep pace with technology-driven market developments influences market perceptions. A financial services firm’s ability to deliver convenience and savings via technological innovation is critical to retaining the loyalty of customers, and hence to its viability.
Leading With Culture
It’s not surprising, given the record unemployment we see today, that attracting and retaining the best talent is on leaders’ minds in organizations of almost every size. Leaders know that today’s prospective employees can afford to be highly selective. An organization’s apparent ambition, people and culture are significant factors when the most-sought-after resources go looking for new employers, because talented people want to work where their skills will be appreciated and where they can work with others of similar mindset and can see a clear pathway for their own success and achievement. They are less impressed with the longevity or historical success of their prospective employer.
Concerns about talent and culture are a fresh reminder that an organization’s commercial success and viability are heavily dependent on the people who work there – leaders and rank-and-file employees alike. Organizations that don’t demonstrate a visionary, change-friendly tone from the top – or those that don’t possess the digital-ready talent in the trenches – are unlikely to reach their strategic objectives. A corporate culture that responds too slowly to market developments and competitive innovation is a significant risk from a strategic perspective. If the organization’s cultural orientation is to resist change, the firm may be incapable of updating its business model to stay viable. If leaders are unable to influence the workforce so that they understand the need to change, or if they are ineffective in dissuading them from resisting change, then neither leaders nor the team can execute any strategic vision. Cultures like these are particularly risky when traditional businesses are faced with a landscape of innovative, born-digital competitors that are delivering products and services better and faster.
Finally, an enterprise’s digital maturity and capacity for innovation directly influence its ability to attract and retain individuals with the technical skill sets it needs. Hidebound culture inhibits and resists the infusion of new, nimble energy in the form of tech-savvy hires, and limits the organization’s ability to navigate the rapidly changing, digital global business environment. This is why leaders must inspire and nurture the cultural attributes that will make their organizations fit for the digital age.
Read additional posts on The Protiviti View related to Top Risks.