Between the climate crisis, political tension, and other rising threats, the era of cascading risk is here to stay. In fact, nearly 90% surveyed about global risk perception anticipate negative scenarios over the next three years, with over 41% expecting “consistently volatile conditions with multiple surprises” and nearly 33% expecting “fractured trajectories.” To survive, businesses will need the capability to identify and assess early indicators ahead of risk events, and to act proactively to mitigate those risks before they become disruptions. Empowering these abilities will require a risk assessment programme that blends data science, automation, and artificial intelligence. How has the landscape of risk changed? Why is base level risk management no longer sufficient? What role does automation play in the future of proactive risk assessment? At ethiXbase, our experts understand that traditional methods of risk management are outmoded and that risk assessment automation is a growing force in the future of risk.
The Risk Landscape
As the risk landscape evolves, businesses need to rethink their approach to risk management, including the frequency of analyses, the kinds of risk analysed, and how to hit the moving target of regulatory compliance.
Point-in-time assessment is not sufficient
The supplier risk landscape is getting increasingly complex. Risk categories are compounded to include a wide range of topics, such as environmental, social, and governance (ESG); anti-bribery and corruption (ABAC); and human rights. With these factors complicating the supply chain risk landscape, point-in-time supplier risk assessment is no longer sufficient. Organisations might be currently analysing their third parties annually or whenever there is a risk-related incident, but this approach is no longer enough. Instead, companies need to be conducting constant monitoring of their supply chains to evaluate partner risk value. In this area, automation can prove vital.
Environmental and social risks are top of mind
Lately, ESG concerns have dominated the risk landscape. As a result, ESG legislation is continuing to take shape around the world, especially regarding corporate ESG disclosure. Most recently, China, Germany, and the EU each issued new legislation and amendments in 2021 to directly address corporate responsibility when it comes to environmental and sustainability risks.
Not only have ESG due diligence requirements increased, but consumer opinion toward corporate ESG responsibility has increased, as well. In fact, 77% of consumers are motivated to purchase from companies committed to corporate social responsibility. With this in mind, businesses have not only a legal obligation to properly address ESG risk, but also an additional revenue and investment obligation.
The inefficiency of point-in-time assessment combined with the growing risks in all sectors, especially ESG, mean that traditional methods of risk management are no longer sufficient. Organisations that take a proactive approach by implementing a risk assessment automation platform will be better prepared for the trajectory of the global risk landscape.
Base Level vs. Proactive Risk Assessment
In this increasingly complex risk landscape, what is the difference between base level risk management and proactive risk management? And why is base level risk assessment no longer sufficient?
Supply chain risk
- Base Level Risk Assessment: Base level supply chain risk management performs assessments annually or at most when there’s a big risk incident. As we established earlier, there are too many factors of supply chain risk to analyse to only perform point-in-time analysis.
- Proactive Risk Assessment: Proactive supply chain risk management monitors and collects relevant data from third-party partners in real-time to identify risks before they become a larger issue.
- Base Level Risk Assessment: Base level risk assessment for regulatory requirements only reviews changes to compliance legislation periodically and requires manual consideration of regulatory developments.
- Proactive Risk Assessment: A proactive risk assessment strategy internalises developments in regulatory requirements automatically, ensuring all data collection, processes, and reporting is performed as they pertain to relevant legislation from governing agencies.
- Base Level Risk Assessment: Base level risk management is not integrated into organisational operations. Rather, it addresses individual risks as incidents that take place instead of identifying them before they become an incident.
- Proactive Risk Assessment: Proactive risk management integrates risk management protocols into every element and level of operations. This includes training and creating a culture of risk assessment, and catching potential risks long before they become an incident.
Risk Assessment Automation
An essential method by which to implement a proactive risk management strategy is to integrate risk assessment automation.
Supply chain risk assessment automation
As its name indicates, a risk assessment automation tool allows companies to automate every stage of the third-party compliance lifecycle. With the right risk management automation solution, you can achieve a consistent, automated process complete with a fully accessible audit trail. It centralises all of your third parties’ information and documentation into one location, while automatically factoring in any changes to regulatory risk requirements.
The experts at ethiXbase have developed the leading Automated Third-Party Risk Management solution: ethiXbase 360. This platform leverages AI technology to digitise and automate your unique compliance programmes and support every stage of your third-party compliance lifecycle for 100% of your supply chain.
Advanced Predictive Risk and Resilience Indicator (APRI)
Working hand-in-hand with automated risk assessment is another important tool: the APRI. With the right APRI tool, you can efficiently screen suppliers for both negative media mentions, signifying risk, and company policies indicative of business resilience. In coordination with your automated risk assessment tool, the APRI aligns risk protocols with active compliance legislations. It also monitors third parties for all categories of risk, including anti-bribery and corruption, human and labour rights, environmental sustainability, and social concerns.
The APRI from ethiXbase is a groundbreaking automated risk assessment tool that enables you to identify, benchmark, and score any negligence or potential mismanagement within your supply chain. Coupled with our in-house resilience modelling algorithm, the APRI provides an ideal environment to confidently future proof your supply chain operations.
Take Automated Risk Assessment to the Next Level
With increasing numbers of global risk regulations, more stringent expectations from governing agencies, and perpetually developing facets of ESG, ABAC, and other forms of risk, there is an extensive amount of risk concerns for organisations to keep up with. Companies need to be prepared not only for the current risk landscape, but also for the future of risk as these challenges only become more complicated.
While the landscape of risk is changing fast, the sophistication of automated risk management is advancing faster. Businesses have reached a crucial moment at which they can either integrate the right automated risk assessment technology and solutions to stay ahead of corporate risk or stick with the traditional risk strategies and fall behind. The experts at ethiXbase have developed the ultimate proactive risk management automation solution to help companies keep up with risk. To learn more about how ethiXbase can streamline your risk management processes with automation, contact us today.