But as to organizational change and its potential impact on risk management, Deloitte looks farther than succession planning. There new report includes asking hard questions about an organization’s approach to risk innovation, how smart assists from technology may automate leadership functions, and accepting the constant threat from disruption.
Financial advisors are used to keeping an eye out for risk, managing options, and avoiding potential areas for their clients. So, managing their own firms’ risk may get less attention. A new report from Deloitte on the future of risk made us ask what can be done beyond our standard risk management approaches? To dig in, we thought we’d review what we think is standard, and then address Deloitte’s report.
Over the last years, we’ve identified and discussed five risk management trends we think are critical and how you can address them. Those five major risk management trends are: cybersecurity and data privacy, talent management and culture, economic and social volatility, regulatory changes, and organizational governance.
We work to regularly bring you information about these topics. In brief our articles on cybersecurity, include recent pieces on the importance of preventing internal weaknesses, including our recent article on that this year where we discussed the importance of updating employee trust.[1] “Those tips include prioritizing employee trust and privacy, collaborating in cross function actions; empowering employees as the best and last lines of defense; and optimizing machine-learning or data visualization to help reduce the burden on staff.” We also addressed the concept of technical debt in an article discussing the importance of company wide efforts to incorporate technology and systems to ensure conformity.[2]
We also have covered economic and social changes, including our recent article on getting more from your statistical sources. “Some sources of retirement trends may be in sources you already track. For example, many advisors pay close attention to the Bureau of Labor Statistics (BLS) for their monthly reports on consumer price index or employment statistics. These snapshots of the current market are essential for day-to-day analysis. But wait, there’s more. BLS also provides information on access to benefits.”[3] Lastly, we monitor regulatory changes and trends we think may be coming, like in our article on whether FINRA’s rule changes show a move towards more enforcement.[4]
But recent reports from industry experts, like Deloitte, indicate that organizational governance may be a topic that needs more attention. We’ve discussed succession planning for clients, but not always for financial advisory firms. And that may be a risk management topic advisors need to consider in the coming years. “By 2029, all baby boomers will be over the age of 65, leaving the businesses they’ve started and/or driven for the last decades in need of transfer or transformation.”[5] Our advice for advisors working with clients may hold true for advisors dealing with succession planning from within too. “Advisors may benefit from learning mediation techniques such as having each individual involved in the discussion identify ahead of time their expectations as well as submit what they view as important documents, like program plans, financial sheets or other key planning documents.”[6]
But as to organizational change and its potential impact on risk management, Deloitte looks farther than succession planning. There new report includes asking hard questions about an organization’s approach to risk innovation, how smart assists from technology may automate leadership functions, and accepting the constant threat from disruption.[7]
But one key insight in this report provides an action item advisors can take on immediately. “Risk transfer instruments, such as insurance, contracts, and novel financial instruments, will increasingly be used by organizations to protect them from a wider range of risks – cyberattacks, climate change, geopolitical risks, terrorism, business disruptions, and more.” Advisors can be proactive now to collect these risk transfer instruments and begin review in an enterprise manner, which may look like ongoing, working group like meetings. By being proactive, advisors may also be able to consider best practices ahead of time, potentially reducing administrative costs for their vendors and advisors.
[1] https://www.bcgbenefits.com/blog/cybersecurity-inside-and-out
[2] https://www.bcgbenefits.com/blog/technical-debt
[3] https://www.bcgbenefits.com/blog/projections-and-statistics
[4] https://www.bcgbenefits.com/blog/finra-enforcement
[5] https://www.bcgbenefits.com/blog/succession-planning
[6] https://www.bcgbenefits.com/blog/advising-small-business-owners
[7] https://www2.deloitte.com/us/en/pages/risk/articles/future-of-risk-ten-trends.html
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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