Businesses in Europe and the US are poised to leave us behind. That may seem a bit blunt and perhaps is a slight overstatement, but the essence of the statement is true, according to new global data released by multinational professional services firm Ernst and Young.
The survey in question looked at businesses around the world and how they are managing their risk. While Australia has historically “been at the forefront of risk management”, we are now merely “on par” with our industrial global counterparts, and that is a concerning trend.
Today we consider how real-time risk management is necessary, in order to compete in global business.
Numbers Don’t Lie
Just under 1200 companies worldwide were part of the survey, with 82 located here in Australia. On many levels our businesses are in line with the global average, but on some critical points they lag significantly. For instance, three out of four Australian businesses prepare management dashboards either quarterly or annually, just below the global average of 78%.
However, only 59% have taken the time to define specific key performance indicators or key risk indicators. Which, incidentally, makes one wonder exactly what kind of benchmarks are used in their management dashboards and how effective their benchmarking efforts can possibly be. Even worse, only 45% utilise technology to define and measure these indicators, well below the 61% global average. This is particularly surprising, when solutions such as our own Compliance Checkpoint are widely available and inexpensive.
Two areas where Australian businesses overall still outpace the rest of the world are in analysing their risk profiles annually and using those profiles in capital allocation decisions, which is a silver lining to an otherwise darkening cloud.
A Fast Moving World Needs Real Time Decision Making
The most disturbing and, frankly, puzzling piece of information about businesses here at home is that an unbelievably miserable 7% of them are identifying and evaluating their risk in real time. Using an annual risk assessment to make adjustments and business decisions in today’s fast paced environment could be described as being as effective as trying to hunt a specific bird based on their migration path from the prior year. It’s simply not likely to bring the desired results.
Constant analysis and adjustments are now necessary to stay competitive in the global economy, and this can only be effectively achieved with real time risk analysis. Businesses in Europe and the US are using this real time risk strategy much more effectively, which gives them a huge competitive advantage.
Many of these factors are tightly connected, especially the use of technology for defining key parameters and for measuring them in real time. To the lay person this might appear to be a practice that would involve substantially increased resources in time and expenditures, but that couldn’t be farther from the truth. In reality, a simple solution such as the Compliance Checkpoint software can accomplish these goals with very little capital expenditure and only the slightest increase in time spent.
It isn’t as if the transition to real time audit results for assessing risk and adjusting business objectives is some out-of-the-box idea. It’s simply the natural evolution of business practices which modern technology affords us. In the near future, the only businesses which won’t be managing their risk in real time will be those who are busy hanging an out-of-business sign out front, still wondering what email is all about and why anyone would need it.