Boards of directors and C-suite leaders across the world are increasingly concerned about their company’s ability to transform operations and infrastructures this year, especially when they are aiming to compete with “born digital” organizations.
According to the seventh annual “Executive Perspectives on Top Risks Survey” from Protiviti and NC State University, released in December 2018, the top 10 risks identified by executives are:
- Existing operations meeting performance expectations, competing against “born digital” firms
- Succession challenges and ability to attract and retain top talent
- Regulatory changes and regulatory scrutiny
- Cyber threats
- Resistance to change operations
- Rapid speed of disruptive innovations and new technologies
- Privacy/identity management and information security
- Inability to utilize analytics and big data
- Organization’s culture may not sufficiently encourage timely identification and escalation of risk issues
- Sustaining customer loyalty and retention
Survey respondents said that the global business environment is somewhat riskier in 2019 compared to previous years, and the survey results suggest that corporations are likely to increase investment in strengthening risk identification and management efforts over the next 12 months.
To dive deeper into this report, Security talked with Jim Deloach, a managing director at Protiviti.
Security: To what do you attribute the jump in concern regarding digital readiness?
Deloach: Protiviti’s research and experience indicate that few organizations are taking the steps necessary to become truly digital in nature. For many companies, corporate executives and their boards are saying they need to focus on the “digital channel” and, specifically, on the technologies and talent to drive that channel. The outcome of these efforts is often a digital veneer. From the standpoint of digital advancement, the organization may appear to outsiders as if it is making progress. But beneath the veneer, true change at the organization’s core is minimal. Over time, as the pace of market change progresses onward relentlessly, I think executives and their directors are uncertain as to whether their organization’s efforts are sufficient.
It is not about how much money is spent. Many organizations may invest heavily in new technologies and digital initiatives, but the changes they may achieve are not necessarily transforming how the organization thinks and acts at its core. Digital transformation is about transforming the organization — its culture, people and processes — to think and act more broadly. So the jump in concern regarding digital readiness is likely due to a general lack of resiliency and agility in staying ahead of – or keeping pace with – changing market realities, the restrictive burden of significant technical debt, a perceived lack of out-of-the-box thinking about both the business model and fundamental assumptions underlying the strategy, and the existence or threat of more nimble competitors. And don’t forget that one of our top 10 risks is resistance to adapting operations in the face of indisputable change; digital readiness is vital to overcoming that resistance.
Security: Talent attraction and retention seem to be key challenges for most sectors today – are there any particular skills or positions enterprises are struggling with most?
Deloach: Digital technology is raising the bar in the war for talent. To thrive in the digital age, organizations need to think and act digital, and this requires a different set of capabilities and strengths. For example, digital leadership is needed – the state of mind that is focused on changing the way in which the organization approaches everything it does. Having the right people is vital to creating the right environment. It’s hard to effect change in the digital era solely with people who grew up in the analog age. Institutional memory is important, but so also is the infusion of fresh creative thinking, collaboration and partnering skills, digital savviness, and the ability to craft and articulate a strategic vision for how the organization will embrace digital capabilities and tools moving forward. Most important are the capabilities to execute a digital strategy that is committed to research, innovation and continuous reinvention.
Other aspects of talent attraction and retention include low unemployment and changing demographics driven by an aging population and how both increase the challenge of sustaining aggressive growth goals. This market reality is forcing renewed efforts at solving old problems. For example, the gender imbalance in science, technology, engineering and math (STEM) leaves technology companies struggling to fill the millions of STEM jobs that will be created over the next decade. Unless this issue is addressed, the implication for technology firms in the future is that there simply won’t be enough people in the talent pool to sustain the continued rapid advances that can be reasonably foreseen in the future. Without an ample supply of skilled talent, executives of technology companies won’t be able to keep pace with change, let alone drive it.
Security: Were there any results from the study that surprised you?
Deloach: We would describe most of the results as expected and interesting. Having said that, we certainly did not expect the number 10 risk last year to jump all the way to the top spot for 2019. That is the risk of the inability of existing operations and legacy IT infrastructure to meet performance expectations related to quality, time-to-market, cost and innovation as well as competitors, especially new competitors that are “born digital” and with a low-cost base for their operations, or established competitors with superior operations. That jump reflects an increasingly competitive environment.
Looking forward, digital transformation is driving uncertainty over business model viability, customer preferences, sufficiency of information for decision-making, the competitive landscape, workplace dynamics and the war for talent, and even regulatory demands. The reality for organizations is they must align their culture, people, processes and intelligence gathering to embrace this rapidly changing environment.
Security: Are there any key takeaways from the study that Chief Security Officers or Chief Information Security Officers should know?
Deloach: Generally, technology executives assessed the risk environment slightly lower than other executives in the C-suite. In addition to the top risk discussed above, technology executives rated in their top five risks the following uncertainties: economic conditions, ability to deploy advanced analytics and big data, ability to manage a reputation-threatening crisis and, of course privacy/identity management and information security/system protection.