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Organizations are concerned about their ability to keep up with a rapidly changing business landscape, driven in part by concerns about their own organizations’ lagging and misconceived digitalization strategies, according to Gartner, Inc.’s latest Emerging Risks Monitor Report.

In the second quarter of 2019, Gartner surveyed 133 senior executives across industries and geographies, and the results showed that “pace of change” had emerged as the top emerging risk in the 2Q19 Emerging Risk Monitor survey (see Table 1). Last quarter’s top emerging risk, “accelerating privacy regulation,” has now become an established risk after ranking on four previous emerging risk reports.

Closely linked to the concern around pace of change are two operational risks, including “lagging digitalization” and “digitalization misconceptions,” which Gartner experts said may be partly driving the top concern around pace of change and related threats from business model disruption.

“Among the top five emerging risks in the quarter’s survey, the linkages are clear,” said Matt Shinkman, managing vice president and risk practice leader in the Gartner audit and risk practice. “Organizations are concerned with the pace of business change and vulnerability to disruption. Part of the reason they may feel this risk so acutely is related concerns around their own operations, including digitalization strategies and an inadequate talent pipeline.”

Table 1. Top Five Risks by Overall Risk Score: 3Q18-2Q19

Source: Gartner (July 2019)

Seventy-one percent of respondents indicated that pace of change was a key risk facing their organizations. This risk was a consistent concern across industries, with particularly high ratings in healthcare, insurance and industrials, with executives in these industries indicating pace of change as a top emerging risk with a frequency of 70% or higher.

The concern around pace of change is driven by fears of being disrupted by nimbler competitors and a lack of clear avenues for growth. This risk can materialize through a rise in the number of new, disruptive competitors, a failure of the brand proposition to meet client needs or demands and executives not responding to macro trends and changing consumer needs.

Risk leaders have a role to play in inserting themselves early in the strategic planning process and to work across function by collaborating with strategy and finance teams to encourage positive risk taking, such as transformative measures to the business.

“Although the pace of business change is the top concern among organizations, we see a lack of tangible action among many organizations to address it,” said Mr. Shinkman. “Twenty-four percent of organizations report no action to address the impact of the pace of change, while only 28% are elevating this risk to the board.”

Digitalization Concerns Increase Vulnerabilities

Other emerging risks that may be contributing to executives’ concerns around pace of change are related to digitalization:

• Lagging Digitalization — Executives expressed concerns that digital budgets were inadequate, a high number of digitalization projects failing, concerns about scaling projects and project delays. Risk leaders can help drive change management initiatives related to digitalization, provide support to employees in a high-change environment, and help assess and manage expectations related to project success.
• Digitalization Misconceptions — With two out of three digital transformation projects failing to achieve their stated objectives, an increasing focus on digital projects can reveal enterprise weaknesses. Progressive organizations favor clarifying strategic objectives early and taking an incremental approach to digitally driven business model transformation. This helps the organization learn at scale, with limited risk.

More detailed analysis is available to Gartner clients in the full report and webinar recording 2Q19 Emerging Risks Report and Monitor.  Nonclients can complete free registration to read more in Emerging Risk Trends. 

About Gartner for Audit & Risk Leaders

Senior executives need actionable information to make quick decisions. Successful organizations embed risk management into strategic decision-making processes to help the business execute on its growth priorities. Gartner for Audit & Risk Leaders equips internal audit and enterprise risk management leaders with insights, advice and tools to better navigate high-risk growth decisions and achieve real-time assurance. More information can be found at: https://www.gartner.com/en/audit-risk.