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The chief risk officer’s role has never been more important – nor more complicated. Their challenge lies in reading an increasingly complex risk landscape, awash with data, to identify rapidly emerging and proliferating dangers. The solution is risk intelligence
From the perspective of the chief risk officer (CRO), the business landscape is an increasingly complex place. Not only for the quantity or severity of risks faced by organisations, but because of their multi-directional nature, their speed of proliferation, and the growing influence of different stakeholder groups.
Against a backdrop of hyper-transparency, global interconnectivity, media anarchy, and accelerated by greater stakeholder activism, new risks emerge at pace. Social networks and the digitalisation of the media have given stakeholders a voice and a platform, allowing risks to be dispersed and to escalate at alarming speed.
Annual risk planning is no longer sufficient to log the risks facing an organisation. Companies are exposed by mercurial shifts in stakeholder expectations. Rapidly evolving risk scenarios leave the CRO, operational risk director, risk committee, and any other operational risk management function handling vast volumes of data describing a constantly changing risk profile.
Potential risks come from many angles and increasingly fragmented stakeholder groups. The only way to capture and analyse the flow of information; to surface and make informed decisions on almost all probable threats; to create a risk management strategy is risk intelligence.
Risk intelligence is a solution that enables organisations to systematically identify the impact and duration of stakeholder risk incidents in a repeatable and verifiable way. Risk intelligence gives businesses the ability to gather information to identify and quantify the risks facing them. It empowers a business to make informed decisions about its risk exposure and security risks.
Using threat monitoring tools and risk mapping, risk intelligence allows organisations to manage risk by identifying and alleviating threats, surfacing opportunities, and ultimately create value for all stakeholders by moving from managing risk to anticipating it. Risk intelligence incorporates any potential hazards that a business may face, from cyber threats to consumer dissatisfaction, extreme weather events, failure of the supply chain or industrial action. Every common risk and high-risk situation needs to be quantified.
Risk intelligence comprises the ability of an organisation to recognise, quantify and ameliorate the hazards generated by stakeholder perception, competitor activities, government legislation, and any other factors that influence corporate success. A risk intelligence solution powered by alternative data, and utilising AI and machine learning, embodies all these elements.
Risk intelligence involves establishing a baseline by modelling risk free scenarios. By scoring historic data for thousands of companies, ‘normality’ – zero-risk – is modelled in relation to different issues and stakeholders. This provides the average risk score for an organisation, and how it usually ranks in its sector.
By mining millions of pieces of content from print, online, broadcast, social media, analyst notes, parliamentary records and stakeholder-specific channels, risk intelligence tools can spot shifts in a company’s risk profile. Quantitative shift alerts fire early warning indicators when a topic breaches normal thresholds. An intelligent alerting system will also have a push mechanism for understanding risks and responding as quickly as possible.
alva’s Risk Intelligence solution offers CROs bespoke applications including horizon scanning, scenario modelling and parametric triggers.
As well as proactively tracking a company’s known risks to report on any material changes to their risk status, risk intelligence provides CROs with a detailed log of all the organic risks facing their business, how these register compared to historic norms, and how their risk profile ranks alongside sector competition. This risk data provides the basis for an integrated risk reporting and management framework across all stakeholders.
With the speed and proliferation of stakeholder risks showing no sign of abatement, the companies that deploy cutting edge risk intelligence solutions will be those that are most successful in preventing emerging risks becoming crises. These will truly be risk intelligence enterprises.
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