For an average US$ 5 billion revenue company it amounts to US$ 99 million annually in opportunity cost from delayed new product launches alone, said Gartner which recently released the results of a survey of more than 382 strategic initiative leaders.
In addition, initiatives where risks are not surfaced and mitigated in a timely fashion are delayed by an average of five weeks per year, the research firm noted.
In a related survey of 111 emerging risk management (ERM) leaders, only 6% felt that their organisation’s risk response was timely during strategic initiatives, Gartner pointed out.
These findings show that risk response usually is not timely, said Emily Riley, senior principal, research in the Gartner Audit and Risk practice.
However, they also show the huge cost of an untimely response, Riley noted, adding that the recent pandemic illustrates the need for an agile response to unexpected risks.”
“The performance benefits of a timely risk response stand out clearly,” she noted. “There’s a business opportunity here because ERM leaders expressed their desire to be more involved in supporting strategic initiative success.”
Other major survey results
- 76% of ERM heads said they wanted to increase the proportion of their time they spend on strategic initiatives.
- More than half said that their involvement should come at the earliest stages of a strategic initiative.
- Ony 11% feel they are involved before an initiative’s execution.
The problem companies often encounter is that initiative teams are not getting the information they need to act on risks in a timely manner, said Riley, adding that this is one area where ERM teams can add value.
This can have several root causes, according to her.
Sometimes many individuals are involved in an initiative without clear accountability to one another, Riley pointed out.
There is also often a sensitivity to candidly sharing information about threats to high stakes projects, she said.
Another common cause is a focus on performance metrics that overshadows forward-looking considerations, she added.