Disruption is increasingly a top of mind issue for both senior management and the Board. As a matter of fact, disruption is at the heart of the strategic risks and uncertainties that organisations face however, limited time is spent on considering disruption both as a risk but importantly also as a strategic opportunity. Therefore, many organisations are unable to leverage a deeper understanding of disruptive risks as a value-adding tool in managing the strategic and operational resilience of the firm. There are a range of cultural, organisational and functional reasons for this internal inertia. However, these should not be allowed to prevent the organisation from:
It is clear from many both B2B and B2C examples (e.g. Amazon, Uber, AirBnB, just eat, 3D printing of aircraft parts, Ocado, FinTech, WeWork, Amazon marketplace, AI) that disruption is a business reality and not just a concept of interest to academics and management consultants. Equally, regulators (e.g. FRC / ARGA in the UK) are putting more emphasis on how emerging / disruptive risks are considered and disclosed.
Disruption can have many sources and paths of evolution:
Organisations need to find ways to change both culture and mindset to enable an open and proactive discussion of disruption and potential mitigations. This will require additional activity outside existing business-as-usual processes. A joint approach, led by the Chief Risk Office and the Chief Strategy Officer, should enable a more fundamental conversation than ‘what are the key risks that might affect the delivery of our strategies and plans’.
However, many organisations are struggling to address disruptive risks and leverage the available insight because:
o The assumption is that more of the same is less risky than new product / service offerings
o Testing the existing business model with disruptive risks can lead to very uncomfortable conclusions
o Engagement and support from the CEO and the Executive team is not visible
o Misalignment of the timing of strategy and risk processes, and in particular consideration of emerging and / or disruptive risks
In a previous article, I set out an experience-based description of the characteristics of a good Board or Executive discussion:
In conclusion, disruptive risks are affecting businesses whether they recognise it or not – the only question is the severity and timing of the disruption. Strategic choices therefore need to be stress-tested against risk appetite, principal risks and disruptive risks to enable better clarity, and indeed management action, on issues such as:
Hans-Kristian Bryn is a Senior Strategic Risk Management and Governance Advisor and an Associate at Headland