PwC Warns of ‘Black Swan’ Business Risk
PwC is warning that many organisations are failing to adopt up to date risk management practices at a time when major-impact, catastrophic events are becoming more frequent.
In a paper entitled Black swans turn grey: the transformation of risk PwC argues that businesses need to be more agile and innovative if they are to combat so-called unpredictable ‘black swan’ events such as riots, terrorist attacks, tsunamis or major oil spills.
Richard Sykes, PwC governance, risk and compliance leader, said: ‘Recent experience suggests events that fit this definition are happening more frequently. Rather than being infrequent outlier events, it seems they are now part of a faster-changing and more uncertain world, which makes it hard for businesses to understand where new risks are going to come from.’
The paper suggests that enterprise risk management (ERM), the practice currently used by most major corporations, may encourage a box-ticking, process-led approach and that as a result, front-line staff may fail to spot how risks impact on their own business decisions.
Armoghan Mohammed, PwC risk partner, said: ‘What is needed is a new, more flexible and holistic approach to risk management that develops a risk aware culture and fosters an explicit focus on risk appetite. There’s growing evidence that businesses that are seen to truly embed a risk-aware culture and behaviours are valued more highly by the markets.’
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