Emerging risk trends: Top risks to identify and address

Senior executives reported concerns around renewed outbreaks of the COVID-19 pandemic as their top emerging risk in the second quarter of 2020, according to Gartner.

Gartner surveyed 131 senior executives across industries and geographies on the top concerns facing their businesses with results showing that the second wave of COVID-19 topped executives’ concerns, even as many regions are struggling with the first wave of the virus.

Concerns related to the financial implications of the pandemic were present throughout the top 10, with executives in particular expressing concerns about their organizations’ new working conditions and strategic responses to the crisis.

“The concerns about a second wave of the pandemic reveal the psychological fragility of most business leaders heading into summer,” said Matt Shinkman, VP with the Gartner Risk and Audit Practice.

“Executives have been grappling with reopening strategies, complicated by different stages of the coronavirus in different regions. It’s now becoming clear that a ‘re-exit plan’ will also be a required part of any such strategy.”

Executives worry about strategic responses to pandemic

While external factors have played an unusually large role in shaping senior executives’ views about risk since the start of the year, it’s notable that two of the top three risks highlighted by executives in 2Q20 were internally focused: developing an effective new working model for employees and customers, and responding strategically to new conditions created by the pandemic.

Regarding the two internal risks related to the pandemic, these are the recommendations:

• The new working model – While executive teams continue to grapple with the requirements of reopening, such as ensuring adequate social distancing measures, transforming workplaces and managing staggered employee schedules, Mr. Shinkman said that employees and customers will also need psychological guidance and encouragement with how to act in this new environment. Risk managers are collaborating across functions to work holistically on these issues while also encouraging scenario planning to reflect the unsettled nature of the ongoing pandemic.
• Strategic corrections – As many organizations move from a pure survival posture to attempting to seek a more effective position in the new operating climate, the pitfalls of overcorrecting or not taking into account regional differences in working conditions could hobble any attempt at a robust recovery. Mr. Shinkman noted an opportunity for risk leaders to complement the work of strategy and finance colleagues by identifying the leading indicators that matter both from a defensive and opportunistic point of view.

Macro risks extend beyond COVID-19

While COVID-19 remains the most immediately visible external threat to executives, additional risks including the status of US/China trade talks and the upcoming US election also landed in the top five emerging risks globally.

“Some of the highest velocity emerging risks over the next 12 months have political and social risk implications,” said Mr. Shinkman.

“These are not areas that large enterprises have a strong history of navigating fluently and will require their risk teams to take proactive steps to understand how potentially historic shifts will alter the business operating environment.”