As with any evolution, a species must adapt to survive.
For businesses (of any kind) in the next five years, adaptation will require the adoption of bold, proactive, and cross-team risk management tactics underpinned by technology. Technology that will magnify—without diluting—critical and timely information. Technology that will continuously apply datasets based on the businesses that survive and thrive—not just the ones that fail—for an efficient and useful set of models. Technology that will help people operate together, by encouraging collaboration–rather than suspicion.
Nowadays, we’re seeing this transformation being driven by technology. If anything, COVID-19, The Suez Canal, and 2021’s microchip shortage have taught us we need to utilize technology to better predict Black Swan events and mitigate risk.
Risk management is all about understanding both big and small variables, planning and mitigating those variables before they impact bottom lines, and controlling what you can in the meantime. Like technology, risk management is constantly being forced to adapt by the conditions ahead. But to evolve at (or ahead of) pace, companies must be equipped in three dimensions—beyond static, backward-looking data that only measures defaults and bankruptcies on a withered, snail-mailed piece of parchment.
As a silver lining to this recent year, there is good news in risk management in particular. This is because advanced technologies, and those that are built specifically for this bold new future, have certain features and capabilities that are innovative. These promising advanced technologies include:
Machine Learning and Predictive Analytics
We will see these technologies emerging via training models and algorithms through millions of real-world data points to produce accurate, actionable, and meaningful, information. These models will be the catalyst that moves your business beyond its current reactive, backward-looking state and will help reveal reliable forecasting. Predictive analytics and predictive sourcing will prove priceless for disaster planning, shortages, and inflation. These models will also help establish better procurement operations and more effective KPIs.
Distributed Ledgers and Custom APIs
These technologies will aid us in safely tracking, housing, and transferring information quickly and securely to and from a variety of specialized. It will become crucial for APIs to co-operate with best-of-breed solutions so that organizations can customize their procurement operations and sourcing teams can have more reliable data and better visibility into buying processes.
Human to Machine Translation and Back Again
Adopting this technology will allow you to produce information that can be used in the purest form of all human-to-human business—dialogue. And more so, it will allow you to interact in a way that helps people understand and communicate new types of information, in an unbiased manner, for more efficient, stronger relationships over time. Technology allows us to take communications off of legacy spreadsheets and email chains, and move it onto collaborative platforms that help build better business relationships and ultimately save time.
As the coming months and years will reveal, different organizations will take different approaches to incorporate each of these technologies into their business strategies. But whatever medium- and long-term risk-mitigation strategies an organization takes, real-world consequences will play out. None of this is just a thought exercise, and it all comes with consequences.
Sounds daunting, right? But isn’t that ultimately the beating heart, and gamble, of any risk management program?
As you move forward in your risk management journey, we challenge you to not just go forward, but also to go boldly.
What’s next for your procurement, sourcing, or supply chain programs? Let’s chat.