How is the risk landscape changing?
A collaborative study between Deloitte and MAPI
Manufacturing faces a pressing need to continually evolve risk assessment capabilities as strategy-related risks become increasingly vital in the future.
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- Considerations for manufacturers
- The path forward
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Understanding risk assessment practices at manufacturing companies
Deloitte and Manufacturers Alliance for Productivity and Innovation (MAPI) conducted a risk assessment practices study to gain insight into how manufacturing companies are assessing and responding to risks today and how they plan to in the future. Executives envision these risk areas will become increasingly vital in the future:
- Cyber security
The study results indicate many internal audit and risk executives are faced with a pressing need to evolve their capabilities.
Considerations for manufacturers
Addressing strategic business risks requires manufacturers to evaluate whether risk assessments are conducted in a manner that benefits the organization to the fullest extent possible. This evaluation should prompt questions as to whether or not risk assessments need to be conducted more frequently to detect emerging risks.
Internal audit plays an important role in providing an independent assessment to the organization of the processes and controls related to innovation and R&D, supply chains, and talent decisions; measuring and developing metrics to determine effectiveness of investments; and monitoring of progress, timelines, and budgets.
Internal audit can also consider the risk management framework methodology, tools, and technology leveraged by the business.
Other areas to consider include measurement techniques for monitoring supplier performance, availability and delivery of materials, and risk sensing analytic capabilities established by the business to monitor risk exposures within the supply chain.
The path forward
Manufacturers today should consider their entire approach to risk. Strategic risks may be the most crucial risks facing many manufacturers, and each company should consider how well its current approach identifies and assesses such risks. A holistic approach to risk and risk assessment is needed and continual attention from a board risk committee, a CRO or other champion, and internal audit supports that holistic approach.
The evolution should focus on better use of technology, changes in the frequency of risk assessment cycles, and imbedding risk management practices within all levels of an organization.
In short, risk assessment and management techniques should advance at a rate equal to or greater than the underlying business if they are to satisfy their business imperatives into the future.