Pandemic, Digital, and Talent Concerns Dominate 2021’s Top Risks

As the COVID-19 pandemic rages on, most companies understandably remain preoccupied with its influence on the economy; the impact of pandemic-related policies and regulation, for example, ranks first on Protiviti’s Executive Perspectives on Top Risks: 2021 & 2030 global survey list. Four other top-10 risks, meanwhile, showcase growing concern about rapidly changing technology.

The findings from the survey, conducted online at the end of 2020, also highlight further influences of the COVID-19 pandemic, the economy, talent, and organizational resiliency on the near-term risk landscape. This year’s report captures insights from 1,081 C-level executives and directors who were asked to rank 36 risks in terms of the relative impact they will have throughout the coming year. Thirty-nine percent of respondents represent companies across a broad range of industries based in North America, 19 percent in Europe, 17 percent in the Asia-Pacific region, and the remaining 25 percent in Latin America, the Middle East, India, and Africa.

Below are the highest-rated risk themes, starting with those that are deemed to have the most significant impact, to provide context for understanding the critical uncertainties that companies face as they look forward to the next 12 months.

1. Impact of pandemic-related policies and regulation on business performance

2. Impact of economic conditions on growth

3. Pressure of pandemic-related market conditions on demand

4. Adoption of digital technologies may require new skills that are in short supply

5. Privacy, identity management, and information security challenges

6. Cyber threats

7. Impact of regulatory change and scrutiny on operational resilience, products, and services

8. Leadership succession challenges; ability to attract and retain top talent

9. Resistance to change operations and the business model

10. Ability to compete with “born digital” and other competitors

Key takeaways from the survey are detailed below.

The world will not return to pre-pandemic norms and organizations should thus embrace the megatrends; the future may arrive sooner than you think. There was nothing unpredictable about 2020. Pandemic risk has loomed on the horizon for a long time, and as with many gray rhino risks, it has always been a matter of “when”—not “if.” Nonetheless, the ongoing COVID-19 pandemic and its effects on the government’s public-health policies, customer behavior, and business performance, as well as the economic distress it has wrought on the marketplace, combine to form the top three risks on the minds of board members and C-suite executives in 2021.

Meanwhile, in industries not dependent on the physical concentration of people, digital leaders have been able to pivot and quickly react to the pandemic’s new normal by engaging customers, innovating new products and services, obtaining better market intelligence for decision-making, and maximizing operational efficiencies. And only digitally invested companies were “future ready” when COVID-19 hit. Through the pandemic, these companies only faced the challenges of coping with overwhelming demand and managing accelerated growth. Digitally prepared companies will most likely continue to maintain their edge going forward as they innovate continuously, and their business models evolve. Hoping that markets will revert to where they were before the pandemic is not a viable strategy.

The 2021 risk landscape reflects a broad range of human resources priorities. Executives are concerned about several interrelated people issues, including the safety and skill relevance of their people, the strength of the executive bench in support of leadership succession planning, and the organization’s ability to attract and retain top talent needed to execute complex strategies, improve digital intelligence and maturity, and facilitate the organization’s resilience in facing the future.

In addition, the realities associated with the future of work are the fourth-rated risk. As work evolves through digital transformation, companies will need to upskill and reskill displaced workers to take on new job functions and fill talent gaps.

Building organizational resilience and an innovative culture is imperative. Thriving in a dynamic and unpredictable business environment requires that organizations secure data and information systems and build and sustain an adaptive and innovative culture, as the risks that dominate the rest of the top-10 list demand. The sustainability, security, and reliability of systems and operating infrastructures that have been affected by the realities of conducting business in the current constrained environment continue to be top of mind. Regulatory change is also a related top-10 concern, as it could obstruct some industries’ efforts to implement necessary improvements to operational resilience and products and services to compete successfully in the global marketplace.

Aside from the top-10 risks, the risks reflecting the greatest year-over-year increases add to the turbulent picture. Risks noted by our survey results as increasing the most in importance from 2020 to 2021 are primarily macroeconomic issues, as executives must deal with volatility in capital and labor markets, shifting governmental policies, border restrictions, and distribution challenges affecting supply chains. Social unrest and a risk of increased activism are also presenting more uncertainty in 2021.

The global business environment is viewed as riskier in 2021. When asked about their overall impressions of the risk environment in 2021, survey respondents collectively signaled that there would be an increase in the potential magnitude and severity of the risk environment for the short term relative to the prior year. Interestingly, when evaluating specific risks, respondents appear less concerned on a risk-by-risk basis, suggesting that they are leery of potentially unknown and unpredictable risks lurking on the horizon.

That said, there are variations in views across industry groups and regions of the world and among directors and C-suite executives regarding the magnitude and severity of risks for 2021. This suggests the need for dialogue at a company’s highest levels to ensure that everyone agrees on the critical enterprise risks that should command the organization’s attention.

Boards should consider these themes in evaluating risk oversight for their individual companies and industries in the coming year. If senior leadership has not identified or prioritized these issues, directors should consider each risk’s relevance to the company’s strategy and for those deemed not relevant, ask why not.