Top Global Risks in 2023 and Projected for 2032

By Michael Santulli and Sean Wu

In the 11th annual survey conducted in the fourth quarter of2022, the “ERM Initiative” at the Poole College of Management, North Carolina State University, gathered insights from boards of directors and C-suite level executives worldwide. The focus was on the risks they perceive to be of paramount concern both in the upcoming year, 2023, and over the long-term horizon, extending to 2032. This initiative, titled “Executive Perspectives on Top Risks”, provides a comprehensive overview of the evolving risk landscape, offering a window into the minds of top executives as they navigate an increasingly complex and uncertain world.

Drawing upon the contributions of 1,304 board members and executives globally, this report encompasses insights from various industries. These leaders were asked to rate 38 macroeconomic, strategic, and operational risks that were previously identified and consolidated. The findings from this extensive survey highlight several key risks that are expected to shape the global financial and business landscape in the years to come.

Key Findings from the ERM Initiative

The ERM Initiative uncovered several significant trends that underscore the challenges organizations will face in 2023 and beyond. Among these trends, certain risks have risen to prominence, reflecting the shifting dynamics of the global economy and the ongoing impact of global events.

1. Global Marketplace Risks: For the first time in a decade, risks associated with the global marketplace are ranking higher than ever before. This change is driven by factors such as fluctuating interest rates, geopolitical tensions, and the lingering effects of the COVID-19 pandemic. The pandemic reshaped the global economy, leading to disruptions in supply chains, changes in consumer behavior, and increased volatility in financial markets. As a result, businesses are now more vulnerable to global financial shocks and must be prepared to navigate a more unpredictable environment.
2. Disruptive Landscape: The 10-year outlook for 2032 suggests that businesses will face a “disruptive” landscape. This disruption will likely be fueled by rapid technological advancements, shifts in consumer preferences, and evolving regulatory requirements. Organizations that fail to adapt to these changes may find themselves struggling to compete, making resilience and agility more critical than ever.
3. Resistance to Change: Resistance to change is identified as a significant impediment to organizational success. Companies that are slow to embrace innovation or that cling to outdated business models may find themselves at a competitive disadvantage. In contrast, those that foster a culture of continuous improvement and adaptability will be better positioned to thrive in an ever-changing market.
4. Human Capital and Organizational Culture: People and organizational culture continue to be top risks. In a tight labor market, attracting and retaining top talent is becoming increasingly difficult, particularly in industries that require specialized skills. Additionally, maintaining a positive organizational culture in a hybrid or remote work environment poses new challenges. Companies must find ways to sustain employee engagement and morale while also promoting a culture that encourages the timely identification and escalation of risks.
5. Supply Chain Risks: The disruptions caused by the COVID-19 pandemic brought supply chain risks to the forefront in 2023. As companies continue to grapple with uncertainties in their supply chain ecosystems, it is clear that robust contingency planning and diversification strategies will be essential for mitigating these risks in the future.
6. Big Data and Cybersecurity: The effective use of big data and the protection of cybersecurity and data privacy are emerging as long-term concerns. As organizations increasingly rely on data-driven decision-making, the risks associated with data management and cybersecurity will only grow. The Global Risks Report 2023 highlights the importance of safeguarding data and ensuring compliance with identity protection regulations. These concerns will continue to be top priorities as we look toward 2032.
7. ESG and Regulatory Changes: Environmental, Social, and Governance (ESG) factors received mixed responses in this year’s survey. While some organizations recognize the importance of integrating ESG considerations into their business strategies, others remain uncertain about the potential impact of these factors on their operations. Additionally, prospective regulatory changes and the possibility of increased agency scrutiny are looming concerns in 2023, particularly as governments around the world seek to address issues such as climate change, income inequality, and corporate accountability.
8. COVID-19 Pandemic: Looking ahead to 2023 and beyond, COVID-19 is now considered an endemic rather than a pandemic concern. However, the long-term effects of the pandemic on global human development, particularly in middle-income countries, will continue to shape the risk landscape. Organizations must     remain vigilant and prepared to respond to future health crises, as well as the economic and social challenges that may arise from them.

Top 10 Risks for 2023

As we move into 2023, the top risks identified by executives reflect the ongoing challenges and uncertainties in the global business environment:

1. Succession Challenges: The ability to attract and retain top talent in a tightening talent market may limit an organization’s ability to achieve its operational targets. This challenge is particularly acute in industries where specialized skills are in short supply.
2. Economic Conditions: Economic conditions in the markets currently served may significantly restrict growth opportunities. Factors such as rising interest rates, inflation, and geopolitical instability are contributing to an uncertain economic environment.
3. Labor Costs: Anticipated increases in labor costs may affect an organization’s ability to meet its profitability targets. Companies will need to carefully manage their labor expenses while also investing in the development of their workforce.
4. Resistance to Change: Resistance to change may restrict an organization from making necessary adjustments to its business model and core operations.     Companies that fail to embrace innovation may find themselves struggling to compete in a rapidly evolving market.
5. Supply Chain Uncertainty: The uncertainty surrounding the core supply chain ecosystem may continue for the foreseeable future. Organizations must be     prepared to navigate disruptions and adapt their supply chain strategies to mitigate risk.
6. Work Environment Changes: Changes in the overall work environment, such as the shift to hybrid or remote work, may lead to challenges in sustaining culture and the conduct of business. Companies will need to find ways to maintain employee engagement and productivity in this new work paradigm.
7. Digital Technologies: The adoption of digital technologies may require new skills that are in short supply, necessitating significant efforts to reskill and upskill employees. Organizations that fail to invest in digital transformation may fall behind their competitors.
8. Organizational Culture: An organization’s culture may not sufficiently encourage the timely identification and escalation of risk issues. Building a strong risk culture will be essential for managing emerging risks and ensuring long-term success.
9. Hybrid Work Challenges: Approaches to managing the demands on or expectations of a significant portion of the workforce to work in a hybrid or remote environment may negatively impact talent retention. Companies will need to balance flexibility with the need to maintain a cohesive and productive workforce.
10. Resilience and Agility: Organizations may not be sufficiently resilient and/or agile to manage an unexpected crisis. Building resilience will be critical for navigating the uncertainties and disruptions that lie ahead.

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Top 10 Risks for 2032

Looking further ahead to 2032, the top risks identified by executives suggest that many of the challenges we face today will continue to evolve, requiring organizations to remain vigilant and proactive:

1. Succession Challenges: The ability to attract and retain top talent in a tightening market will continue to be a critical concern, particularly as the demand for skilled workers outpaces supply.
2. Digital Skills: The adoption of digital technologies will require new skills that are in short supply, necessitating ongoing efforts to reskill and upskill employees. Organizations that fail to invest in their workforce may struggle to keep pace with technological advancements.
3. Disruptive Innovations: The rapid speed of disruptive innovations enabled by new and emerging technologies and other market forces may outpace an     organization’s ability to compete. Companies will need to stay ahead of the curve by continuously innovating and adapting to change.
4. Resistance to Change: Resistance to change will remain a significant barrier to success. Organizations that are slow to embrace new business models and     operational practices may find themselves at a competitive disadvantage.
5. Privacy and Compliance: Ensuring privacy and compliance with growing identity protection expectations will require significant resources. As data privacy regulations continue to evolve, organizations will need to invest in robust compliance programs to mitigate risk.
6. Legacy Infrastructure: Existing operations and legacy IT infrastructure may not be able to meet performance expectations as well as “born digital” competitors. Companies will need to modernize their systems and processes to remain competitive in a digital-first world.
7. Big Data Utilization: The inability to utilize data analytics and big data effectively may limit an organization’s ability to achieve market intelligence and increase productivity and efficiency. Companies that fail to harness the power of data may miss out on key opportunities for growth.
8. Economic Conditions: Economic conditions in the markets currently served may continue to restrict growth opportunities. Organizations will need to navigate the complexities of the global financial landscape to remain competitive.
9. Regulatory Scrutiny: Regulatory changes and scrutiny may heighten, noticeably affecting how products or services are produced or delivered. Companies will need to stay ahead of regulatory developments to avoid compliance issues and potential penalties.
10. Labor Costs: Anticipated increases in labor costs will continue to impact an organization’s ability to meet profitability targets. Companies will need to find ways to manage labor expenses while also investing in their workforce.

Conclusion

As the global risk landscape continues to evolve, organizations must remain agile and resilient to navigate the challenges that lie ahead. The findings from the ERM Initiative highlight the need for a proactive approach to risk management, with a focus on building a strong risk culture, investing in human development, and staying ahead of emerging risks.

By addressing the full spectrum of high-level risks, organizations can better position themselves to achieve their mission and vision while maintaining a competitive edge in an increasingly uncertain world. For tailored Enterprise Risk Management services that support your organization’s success, contact us today. Our experts are ready to help you navigate the complexities of the modern risk landscape with communication, consistency, and continuity.