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Executive Perspectives on Top Risks for 2016

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Protiviti partnered with North Carolina State University’s ERM Initiative to conduct our fourth-annual Executive Perspectives on Top Risks Survey. We obtained the views of more than 500 board members and C-suite executives about risks that are likely to affect their organization in 2016. This presentation was presented in conjunction with a webinar on March 23 2016. The full report can be downloaded at www.protiviti.com/toprisks

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Executive Perspectives on Top Risks for 2016

  1. 1. Executive Perspectives on Top Risks for 2016 Presenters: Mark Beasley, Pat Scott, Jim DeLoach March 23, 2016 – 3:00 pm U.S. Eastern Time
  2. 2. © 20162 Following the webinar, all attendees will receive a link to a copy of the presentation and recording. The survey report is available under the “Resource List” on the left of the presentation module. During the webcast, you can ask questions using the Q&A function. There will be a Q&A session at the end of the webinar. If you are having trouble hearing the audio through the computer, separate phone lines are available. A Reminder
  3. 3. © 20163 We offer one (1) CPE credit for this presentation. To be eligible to receive these credits, ensure to answer (4 out of) the five (5) polling questions throughout the duration of this webinar. We also appreciate receiving your feedback via the CPE Course Evaluation Form. (Available under “Resource List”). You can return this evaluation form to Esther Veenhuizen at Protiviti via: e-mail: esther.veenhuizen@protiviti.com or fax : (+1) 212-708-6479 CPE Credits
  4. 4. © 20164 To get an idea of our audience that is currently attending our live webinar, we’d like to ask you – in which area of your organization are you currently working? a) Board or Executive Management b) Line of Business c) Compliance d) Risk Management e) Internal Audit f) Other Polling Question #1
  5. 5. © 20165 Today’s Presenters Mark S. Beasley is the Deloitte Professor of Enterprise Risk Management and Director of North Carolina State’s Enterprise Risk Management (ERM) Initiative, which provides thought leadership about ERM practices and their integration with strategy and corporate governance. Mark recently completed over seven years of service on the board for the Committee of Sponsoring Organizations of the Treadway Commission (widely known at COSO). He is a frequent speaker at national and international conferences on ERM, internal controls, and corporate governance, including audit committee practices and frequently works with boards of directors and senior executives on risk oversight issues. He received a BS in accounting from Auburn University and a Ph.D. from Michigan State University. Visit www.erm.ncsu.edu. Pat Scott is Protiviti's executive vice president, global industry and client programs. He oversees and coordinates the efforts of the Industry Program leadership, as well as guides the strategy for the program, which encompasses seven industries. Scott also leads Protiviti’s client cornerstone and account management program, ensuring delivery on our promise to our clients and helping serve the complex needs of Protiviti’s largest clients around the world. He previously served as regional managing director for the Central United States. He is an experienced consultant with more than 25 years of experience delivering internal audit solutions to clients in a variety of industries. Prior to joining Protiviti as a founding managing director, he was a partner at Arthur Andersen. Scott holds a bachelor’s degree from Purdue University. He is an active member of the American Institute of Certified Public Accountants (AICPA) and Institute of Internal Auditors (IIA).​
  6. 6. © 20166 Today’s Presenters Jim DeLoach has more than 35 years of experience and is a member of the Protiviti Solutions Leadership Team. His market focus is on helping organizations integrate risk management with strategy setting, business planning and performance management. Jim serves as a member of Protiviti’s Solutions Leadership. He was one of 25 recipients of the “Consultant of the Year” award from Consulting Magazine in 2011. In each of the last four years, he was named to the National Association of Corporate Directors’ Directorship 100 list, recognizing him as one of the 100 most influential governance professionals in the boardroom community. He has served on the COSO Advisory Council for almost 10 years, contributing to the development of the original Enterprise Risk Management – Integrated Framework, the COSO Project on Monitoring, the update to the Internal Control – Integrated Framework and, more recently, the update to the ERM framework. He has worked with, and delivered numerous presentations to, hundreds of companies and groups in 30 countries. He writes many Protiviti publications and publishes monthly with NACD Directorship and Corporate Compliance Insights.
  7. 7. © 20167 Introduction • Protiviti and North Carolina State University’s ERM Initiative surveyed 535 board members and C-suite executives globally on risks likely to affect their organizations over the next 12 months • The survey provides perspectives on the potential impact of 27 specific risks across three dimensions: – Macroeconomic Risks: Likely to affect the organization’s growth opportunities – Strategic Risks: Likely to affect the validity of the organization’s strategy for the pursuit of growth opportunities – Operational Risks: Likely to affect key operations of the organization in executing its strategy
  8. 8. © 20168 Survey Methodology • Respondents were asked to rate 27 individual risk issues using a 10-point scale: − A score of 10 reflects Extensive Impact to the organization over the next year − A score of 1 reflects No Impact at All • Based on average scores, we categorized these risks into one of three classifications: – Significant Impact: Risks with an average score of 6.0 or higher – Potential Impact: Risks with an average score of 4.5 through 5.9 – Less Significant Impact: Risks with an average score of 4.4 or lower
  9. 9. © 20169 Survey Respondent Breakdown Organization Size Revenues $10 billion or greater 12% Revenues $1 billion to $9.99 billion 48% Revenues $100 million to $999.99 million 27% Revenues less than $100 million 13% Executive Position Board Member 4% Chief Executive Officer 8% Chief Financial Officer 7% Chief Risk Officer 27% Chief Audit Executive 20% Other C-Suite 11% Industry Financial Services 31% Consumer Products and Services 22% Manufacturing and Distribution 16% Technology, Media and Communications 8% Healthcare and Life Sciences 7% Energy and Utilities 9% Note: The balancing figures are for other respondent categories
  10. 10. © 201610 Key Findings • Global business environment in 2016 perceived slightly more risky for organizations than it was in in 2015, but not as risky as in 2014. • The top 10 risks vary in nature – There are growing concerns about operational risk issues. • Regulatory change and heightened scrutiny is –again– top overall risk. • ​Domestic and international economic conditions are raising concerns. • ​Cyber threats disrupting core operations is again a top 5 concern for 2016. • Boards of Directors, CEOs and other members of the executive team report differing views of the top risk exposures facing their organizations. • CEOs and CFOs perceive a riskier environment.
  11. 11. Top 10 Risks
  12. 12. © 201612 M M O S O O O M M
  13. 13. © 201613 My organization conducts a comprehensive risk assessment, at least annually, that effectively delineates the critical enterprise risks from the day- to-day business risks a) Strongly Agree b) Agree c) Unsure d) Disagree e) Strongly Disagree Polling Question #2
  14. 14. © 201614 #1 – Regulatory Risk Regulatory changes and scrutiny may heighten, noticeably affecting the manner in which our products or services will be produced or delivered
  15. 15. © 201615 #2 – Economic Conditions and #8 – Volatility in Global Financial Markets Economic conditions in markets we currently serve may significantly restrict growth opportunities for our organization Anticipated volatility in global financial markets and currencies may create significantly challenging issues for our organization to address
  16. 16. © 201616 #3 – Cyber Threats and #5 – Privacy and Identity Protection Our organization may not be sufficiently prepared to manage cyber threats that have the potential to significantly disrupt core operations and/or damage our brand Ensuring privacy/identity management and information security/system protection may require significant resources for us
  17. 17. © 201617 My organization has significantly increased efforts and resources around protection against cyber attacks over the last year and I expect this trend to continue over the next 12-24 months: a) Strongly Agree b) Agree c) Unsure d) Disagree e) Strongly Disagree Polling Question #3
  18. 18. © 201618 #4 – Succession and Retention Challenges Our organization’s succession challenges and ability to attract and retain top talent may limit our ability to achieve operational targets
  19. 19. © 201619 #6 – Disruptive Innovations and Technologies Rapid speed of disruptive innovations and/or new technologies within the industry may outpace our organization’s ability to compete and/or manage the risk appropriately, without making significant changes to our business model
  20. 20. © 201620 #7 – Resistance to Change Resistance to change may restrict our organization from making necessary adjustments to the business model and core operations
  21. 21. © 201621 #9 – Organization’s Culture Our organization’s culture may not sufficiently encourage the timely identification and escalation of risk issues that have the potential to significantly affect our core operations and achievement of strategic objectives
  22. 22. © 201622 #10 – Customer Loyalty and Retention Sustaining customer loyalty and retention may be increasingly difficult due to the evolving customer preferences and/or demographic shifts in our existing customer base
  23. 23. Industry Analysis
  24. 24. © 201624 Analysis Across Industry – Top 5 Risks* Risk Issues Overall FS CPS MD TMC HLS EU Regulatory risk Economic conditions Cyberthreats Succession/talent Security/privacy Rapid speed of disruptive innovations Resistance to change Financial markets/ currencies Organization’s culture Customer loyalty/retention Healthcare reform Significant Impact – Rating of 6.0 or higher Potential Impact – Rating of 4.5 – 5.99 * Includes ties as well as differences among industry groups
  25. 25. © 201625 As organizations evolve their risk governance practices, relevant and timely information about emerging risks is key. Does your organization have processes in place to proactively identify and assess emerging risks? a) Yes (e.g., risk committee, scenario analysis, periodic executive team agenda item, etc.) b) I think so, but I’m not aware how these processes are organized or being managed to ensure they are effective c) Unsure d) No Polling Question #4
  26. 26. Analysis across Respondent Role
  27. 27. © 201627 Analysis Across Respondent Role – Top 5 Risks* Risk Issues Overall Board CEO CFO CRO CAE CIO Regulatory risk Economic conditions Cyberthreats Succession/talent Security/privacy Rapid speed of disruptive innovations Resistance to change Financial markets/ currencies Organization’s culture Customer loyalty/retention Sovereignty risk/political gridlock Organic growth Outsourcing/strategic sourcing Uncertainty in supply chain * Includes ties as well as differences among industry groups
  28. 28. Analysis across Organization Size
  29. 29. © 201629 Analysis Across Organization Size – Top 5 Risks Risk Issues Overall $10B or Greater $1B – $9.99B $100M – $999.99M Less than $100M Regulatory risk Economic conditions Cyberthreats Succession/talent Security/privacy Rapid speed of disruptive innovations Resistance to change Financial markets/ currencies Organization’s culture Customer loyalty/retention Crisis management Significant Impact – Rating of 6.0 or higher Potential Impact – Rating of 4.5 – 5.9
  30. 30. © 201630 How confident are you that all executive stakeholders who should be engaged in the risk assessment process in your organization are participating in the process? Rank on a scale from 1-5 with 5 being highly confident and 1 being not at all confident: a) 1 b) 2 c) 3 d) 4 e) 5 Polling Question #5
  31. 31. Top 5 Increases and Decreases
  32. 32. © 201632 Top 5 Increases
  33. 33. © 201633 Top 5 Decreases
  34. 34. Q&A
  35. 35. Thank you! For more information and to download the full report Executive Perspectives on Top Risks in 2016 visit: www.protiviti.com/toprisks and www.erm.ncsu.edu

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