Interconnected Risks Rapidly Rising
In a recent survey of over 700 risk management professionals worldwide across major industries, 83% say that risks are becoming far more interconnected and harder to segregate, leading to outsized impacts
A groundbreaking global study by Accenture has revealed that the growing interconnectedness of systems, supply chains, and sectors is causing a swift emergence of complex, interlinked risks that most businesses are ill-equipped to handle. The Accenture Risk Study 2024 report is based on a survey of over 700 risk management professionals worldwide across major industries. 83% of respondents say that risks are becoming far more interconnected and harder to segregate, leading to outsized impacts.
Cyber risks have emerged as one of the leading threats endangering companies as well as individuals. According to estimates from Statista’s Market Insights, the global cost of cybercrime is expected to surge in the next four years, rising from $9.22 trillion in 2024 to $13.82 trillion by 2028. Cybercrime is defined as the “damage and destruction of data, stolen money, lost productivity, theft of intellectual property, theft of personal and financial data, embezzlement, fraud, post-attack disruption to the normal course of business, forensic investigation, restoration and deletion of hacked data and systems, and reputational harm.”
“You can’t think about risks in isolation anymore,” noted Riccardo Roscini, Head of Enterprise Risk Management at European bank UniCredit. “A geopolitical event can trigger supply chain disruptions and inflationary pressures, which lead to rising interest rates – it’sall connected.”
Surprisingly, just 14.5% of the organisations surveyed have advanced levels of risk management capabilities such as implementing technologies to improve decision-making and onboarding leading data analytics skills into the risk function. These organisations are also more likely to be growing as businesses.
Technology Driving Morphing Threat Landscape
The report highlights how advancing technology is a major contributor towards this interlinked risk climate. 30% of survey respondents pointed to disruptive technology threats as having grown most over the past two years. Specifically, cyber risks are rapidly evolving as attackers leverage new techniques like deepfakes and increasingly target critical infrastructure. The emergence of AI is also enabling more sophisticated, harder-to-detect social engineering and fraud.
“Risks that seemed mostly harmless just a few years back now have amplifying effects on other exposures,” said Heather Adams, Managing Director at Accenture Risk and Compliance. “Leaders need to completely re-evaluate threats.”
A quick take on how disruptive technology risk
Advances in machine learning (ML) technology allow the creation of deepfakes, which are digitally manipulated media that alter facial appearance. For creative industries such as music, film and television, this increases the risk of abuse of rights and intellectual property. The fast-fashion industry uses AI to predict fashion trends. Algorithms analyse web searches and blogs to set purchasing, sales and even store-display strategies. This offers retailers a huge advantage, but also represents an immense risk to traditional designer brands, which can be out-manoeuvred.
Across virtually all industries, traditional businesses are vulnerable to this type of high-speed existential business-model disruption driven by technology risk. Employees across all sectors now use generative AI tools such as ChatGPT to help carry out day-to-day tasks. It has huge benefits, but it also creates major risks. Executives are often completely unaware of how these tools are being used. For example, should a credit analyst at a bank use generative AI to unearth information about a business when they have no idea where the data comes from? The lack of regulation makes it even harder for businesses to establish governing rules.
Risk Detection and Mitigation Capabilities Lacking
Worryingly, despite this step change in the risk landscape, most businesses haven’t kept pace. 72% of surveyed executives admit their risk management capabilities have not evolved at the same velocity to effectively detect and mitigate emerging threats. High degrees of interconnectivity also mean that risks now easily propagate across sectors. 81% of respondents say risks in other industries are impacting their business too. Yet only 35% are highly satisfied with their ability to understand cascading risks.
Need to Follow More Advanced Risk Leaders
The report advises companies to follow the playbook of ‘risk leaders’ – the 15% of surveyed firms that have the most mature risk management capacities. These leaders are urgently upskilling teams, tapping new data sources to enhance risk insights, and working enterprise-wide to build risk accountability.” Technology is both exponentializing risk interconnectedness but also holds the promise to overcome threats,” said study co-author Samantha Regan. “By emulating risk leaders, firms can turn resilience into a competitive advantage.”
As hyperconnectivity looks set to accelerate, the need of the hour is a reinvention of risk management to handle a more treacherous, interlinked environment. The hope is that by learning from risk leaders, businesses can transform risk management from a defensive necessity to an enabler of resilient growth.