The overall risk readiness for the Top 10 risks identified in Aon’s 2019 Global Risk Management survey has dropped from 53% in 2017 to 51% in 2019. Failure to innovate and meet customer needs is one of the top ten risks, at number nine, with participants in the survey reporting a loss of income experienced as a result of failure to innovate and meet customer needs increasing from 15% in 2017 to 25%.
But despite the fact, the risk experienced an 11% reduction in risk readiness among participants in the survey due to digitisation, changing business models and readily available alternative products and services. The overall level of risk preparedness for this specific risk is nowhere near what it should be, bringing the need for a comprehensive risk management strategy into sharp focus.
Examples where failure to innovate or meet customer needs affect industries:
- Well-known corporations such as Toys R Us, BlackBerry, Hitachi and The Concorde, are but a few of the many companies that have dwindled away due to failure to innovate.
- Those in the publishing and printing industry is trying to survive revenue shortfalls and staff downsizing due to a seismic shift in digital technology and people’s reading habits.
- In the telecommunications industry, where the lifetime of products continues to shrink, the race to market has intensified.
- In the transportation manufacturing sector, companies are now competing with many tech giants, experimenting with autonomous driving, e-cars, digital services and mobility platforms.
Only 45% of surveyed organisations have a risk management plan in place, though. In the absence of a thorough risk assessment, uncertainty may accelerate or underestimate the importance of a risk such as failure to innovate and meet customer needs, meaning that the balance of businesses may not even understand the magnitude of this risk.
An increasing number of industries are, however, focusing on risk management strategies. This fact, alone, means that there are an array of tried and tested tools and techniques available to businesses that can help to quantify and improve their risk preparedness, resilience and sustainability, and thus change the emerging trend.
In the face of consumer needs and preferences that are becoming increasingly fickle: innovation is a necessity, not an option.
It also means that disruptive technologies, such as artificial intelligence, blockchain or the Internet of Things may be the key to transforming the current playing field.
This pushes traditional risk management approaches into a different sphere. Start-up companies tend to be more agile and experimental in their risk appetite and enjoys a significantly lowered exposure to the risk of failure to innovate.
Larger corporate companies who tend to stay on the safe side of caution, have a few things to learn from their smaller counterparts in embracing an approach of managed risk-taking.
It is up to every company to find the opportunity to reinvent itself in an ever-changing market where disruption is the fast becoming the norm. It is crucial for every company to adopt a risk management process that is able to identify opportunities to innovate and adapt to customer needs. Those that are unable to, will simply become irrelevant.