Is Your Business Ready For The New Riskonomy?

In today’s fiercely competitive landscape, businesses are racing to gain a technological advantage. Are they equally prepared to navigate the complex risks that come with these advancements?

The New Riskonomy, a report by Hogan Lovells, which investigates the most significant risks and challenges in today’s technology landscape, reveals that two-thirds of business leaders believe their organizations could be taking more proactive approaches to managing technology-associated risks, with many business leaders seeking additional guidance to navigate ever-changing legislation and new compliance obligations.

The rising tide of technology-related risks

Generative AI and other transformative technologies promise significant growth and innovation opportunities, but they also carry potential business-critical risks. Our survey indicates that 91% of businesses are already grappling with moderate to high levels of technology-related risk, particularly concerning cybersecurity, data management, bridging digital skills gaps, and integrating generative AI. Addressing these vulnerabilities is pivotal for ensuring  business continuity and safeguarding against potential litigation, fines and reputational damage.

Balancing innovation and risk can be a challenge. While most organizations recognize that today’s technology landscape poses significant risks, leaders may benefit from consistently embedding protective measures. As many as three in five organizations told us they need more proactive approaches and essential strategies to effectively mitigate these risks.

Mapping your risk exposure

The first step to protecting your business is to have an accurate picture of its true vulnerabilities—within the external world, within its network or even within its walls. With cybersecurity cited as the second-highest concern when it comes to potential litigation disputes and investigations, conducting a cyber health check is particularly vital for leaders across every sector to protect against data leaks and maintain consumer trust.

Using insights from our research, we have developed a benchmarking tool— the Riskonomy Radar—to help business leaders assess just that, and identify whether their greatest exposure stems from external factors, supply-chain partnerships, or internal operations.

Understanding network risk

Given that you are only as secure as your most vulnerable supplier, we recommend business leaders adopt a 360° approach to risk management, ensuring internal systems and processes are secure, while remaining vigilant to threats such as cyberattacks or supply-chain vulnerabilities. Despite 91% of C-suite and General Counsel claiming to assess the technology risk profile of their relevant suppliers, our survey found that less than two in five do so consistently. Taking supplier risk seriously from the offset and always carrying out an assessment when it comes to technology vulnerabilities is a crucial step in implementing robust supply chain practices.

Closing the skills gap

Another, often-overlooked, source of risk exposure occurs closer to home. To successfully invest in technological innovation to drive growth and develop competitive advantage, business leaders must also consider the other side of the equation: their workforce. General Counsel and C-suite leaders in our study believe that, on average, a fifth of their workforce does not currently have the digital skills to support their business strategy.

Investing in workforce digital skills is more essential than ever to keep pace with technological advancements— including AI—and business leaders should consider their approach to recruitment, acquisition or reskilling, and upskilling training programs.

Integrating legal expertise

Legal counsel plays a pivotal role in navigating technology legislation and compliance, and in ensuring innovation does not come at the cost of increased vulnerability. By integrating legal expertise into their technology strategies, companies can pre-emptively address potential risks and regulatory challenges. For instance, despite the critical importance of cybersecurity, 31% of businesses report that their legal teams are not involved in the creation of their incident response plans. Partnering with trusted legal teams on relevant incident response plans can not only ensure compliance with evolving regulations but also reduce potential exposure to legal and regulatory repercussions in the event of a breach.

Investing in the right place

Our data reveals a positive correlation between organizational growth and levels of investment, with high-growth organizations investing 14% more in their IT budgets than low-growth organizations to protect against technology-associated risks. And this investment pays off; according to the Riskonomy Radar, 42% of high-growth organizations are in the low risk range (compared with 20% of no-growth organizations), and 38% of no-growth organizations are in the high risk range (compared with 29% of high-growth organizations).

While investing in strategies to manage technology-related risks doesn’t guarantee wider organizational growth, the trend suggests that these practices complement each other effectively for advancing business success.

Building risk resilience

As technology continues to evolve, so do the associated risks. To maintain security and competitiveness, business leaders must stay informed and proactive in their approach to technology risk management. By prioritizing technological investments, fostering workforce development, and leveraging legal expertise to anticipate emerging challenges, organizations can build resilience and adaptability, and ensure they are ready for the opportunities of tomorrow.