Global report calls for innovation as a solution to present challenges
A new report finds that insurance leaders are the least confident among those in the financial sector when queried about managing and overcoming risks and current challenges, with only 36% saying that they are confident in their ability to handle these issues.
Global fintech firm FIS recently unveiled the results of its Global Innovation Report, sharing the insights of over 2,000 C-suite and senior executives across various industries about their avenues of tackling risks, especially as new challenges come forward in an increasingly volatile environment.
Risks and rewards
The survey highlights that approximately half (49%) of the respondents perceive their organisations to be facing more risk than before. Among various sectors, retailers appear to bear the brunt, with 60% indicating an escalated sense of risk compared to the past.
Economic factors, including rising inflation and interest rates, persistent supply and staffing shortages, and an increasingly fragmented market rife with competition, are propelling financial and strategic risks to the forefront of business concerns. A significant 63% of organisations express worry regarding financial risk, while 54% are troubled by strategic risks.
When analysing sectors, capital markets and fintech respondents stand out, identifying rising interest rates, inflation, and market volatility as their primary worries, firmly placing financial risk as their top concern. Retailers echo this concern, with 81% citing apprehensions regarding financial risk, notably due to rising inflation affecting consumers’ disposable incomes, and 78% expressing distress over supply chain disruptions.
New regulations, emerging tech
The emergence of new regulations, coupled with uncertainties surrounding emerging technologies such as generative AI, has led firms within the financial services sector to rank legal and regulatory risk as their third most pressing concern, at 43%. Conversely, non-financial services organisations, encompassing technology, retail, energy, utilities, and healthcare sectors, exhibit a higher concern for operational risk over legal and regulatory risk.
The scale and potential impact of risks have a direct bearing on executives’ attitudes towards associated risks. Financial risk dominates the concerns across all sectors, barring the tech sector. Data reveals that 55% of respondents concerned about financial risk have already felt its impact. Additionally, 31% of all organisations anticipate being affected by this risk in the next 12 months. Strategic risk, the second most significant concern, has already affected 51% of all firms.
On the other hand, environmental and transition risk, while ranking fifth in terms of concern, only troubles 37% of executives. However, with the Securities and Exchange Commission (SEC) mandating ESG reporting, and other policymakers globally following suit, all companies will need to be prepared. Notably, 41% of financial services firms express concern about environmental and transition risk, with insurers being the most affected and anxious, with 46% citing this risk as a concern.
Innovation as a primary measure
Despite facing heightened risk levels, a staggering 93% of organisations exude confidence in their ability to manage and overcome current challenges. This confidence varies across organisations, aligning with their experience and approach to risk. For instance, executives in the highly regulated financial services sector are notably more confident in managing macro risks (48% compared to the all-industry average of 44%).
The role of innovation in risk management is universally acknowledged, with 90% of respondents affirming its importance in mitigating current risks. Early adopters of technology, characterised by their willingness to embrace risks and introduce new technology early on, display increased confidence in managing current risks. A notable 60% of executives in this category express a high level of confidence in their organisation’s ability to navigate and mitigate risks effectively, surpassing the 44% average across all organisations.
Courtesy : https://www.insurancebusinessmag.com/us/risk-management/news/which-industry-is-the-least-confident-in-managing-their-risks-462971.aspx