Businesses need to 'reimagine' how they approach risk and compliance in order to remain competitive in a changing world, a new report from BCG has found.
BCG's report, New Ways to Combat Rising Complexity and Costs, suggests that as risk landscape shifts and the regulatory landscape intensifies, businesses are facing rising costs and are forced to navigate complex, fragmented processes that hinder their responsiveness.
The study draws on insights from a global survey of senior risk and compliance executives, and suggests that businesses that adopt a 'more streamlined, efficient approach to risk management ' can significantly reduce their burden when it comes to compliance, as well as improve their overall resilience.
It also notes that many companies are currently 'underutilising' Gen AI and related tools as a method of reducing operational burdens, instead focusing on higher-level initiatives that fail to address underlying complexities.
'A Rising Tide'
"Organisations are facing a rising tide of regulatory and risk-related challenges that are driving up operational costs," commented Katharina Hefter, a managing director and partner at BCG and a co-author of the report. "Our research indicates that many companies are addressing these challenges with piecemeal solutions rather than taking a holistic approach, which ultimately increases organisational complexity.
"To stay resilient, businesses need to simplify their processes and frameworks, leveraging new technologies such as generative AI while prioritising the most critical risks."
Focus Areas
Other areas of focus include the rapid elevation of emissions reporting to the top of risk priorities, fuelled by regulatory requirements such as the EU’s Corporate Sustainability Reporting Directive; the rise of reputational risk; and often complex, overlapping demands from external regulations and internal audits – all factors that increase the burden on firms.
To mitigate these challenges, BCG advises companies to redefine governance structures, simplify risk management processes, and increase their investment in advanced analytics and AI capabilities for real-time monitoring and response
"A holistic strategy that integrates new technologies and reduces redundancy will empower companies to navigate complex demands more effectively, driving both agility and resilience," added Julia Gebhardt, a managing director and partner at BCG and a co-author of the report.
