Why Unexpected Risks Become Opportunities for Well-balanced Executive Teams

LS International

Recently, my team and I were being briefed on a call about a new executive search mandate for a senior commercial role. The client, who is the Business Head of a US-based Consumer Products company, said somewhat ruefully, “Success in business has never been easy, and in today’s challenging landscape, adaptability is key. The ability to navigate unexpected situations with agility, mitigate risks, and embrace uncertainty has become the hallmark of thriving companies.”

Mitigating risks is part of planning for growth- but what about unexpected risks?

In recent years, the challenges of leading a business successfully have become more complex as a result of rapid changes in the environment. Amongst the numerous forces of change, the following are the most dominant:

  • Shifting customer needs, expectations, and preferences.
  • The emergence of new business models such as DTC and instant commerce, that are disrupting more conventional E-commerce as well as brick-and-mortar models.
  • Powerful new technological capabilities (both in terms of software paradigms such as Generative AI, Analytics, IoT, etc., and the underlying hardware/processing power) are creating new pathways for enterprises to unearth actionable insights about customers/ consumers and act on them with greater agility. 
  • Sustainability now spans supply chains, production/operations as well as go-to-market strategies and tactics. Indeed, products/services are increasingly being designed to minimize carbon footprints. 

Each of the above forces gives rise to its own business imperatives. While these vary with the underlying business characteristics (industry, size, segments addressed, value proposition, etc.), it is clear that they also give rise to risks that enterprises must consciously manage. Businesses need people who understand the different kinds of risk and can work collaboratively with internal and external stakeholders to address them. Two new types of risk are becoming more critical by the day. While they are both very different in nature, what is common is the suddenness with which they can manifest and the magnitude of their business impact. 

The first such risk pertains to the rise in the number of geo-political flashpoints around the world and the consequent increase in armed conflicts. Whether it is Russia-Ukraine, Israel-Hamas, or the Houthis targeting ships transiting through the Red Sea, businesses are paying a price. Transport costs, as well as insurance premia, are going through the roof. Waiting times for materials/components have risen, throwing production schedules out of kilter. In turn, this impacts SKU availability at the channel level, thus affecting sales. Many Western businesses have had to shut down their businesses in Russia. The operations of some businesses in Israel/Gaza too have been impacted adversely.

The second risk has to do with cybersecurity and breaches of private data related to customers and confidential business information. The average global cost of cybersecurity breaches in 2023 is estimated at US$4.45 million (source: https://www.ibm.com/reports/data-breach). Many well-known enterprises have been impacted by unexpected cyberattacks. In my circle, numerous individuals recall the cyber attack that targeted one of the prominent beauty brands in July 2023. This incident resulted in significant operational disruptions for the company, leading to substantial financial losses…

Another technology-related risk has to do with “hallucinations” by Generative AI systems, leading to plausible outputs that are blatantly inaccurate. This may not be as sudden as the two risks mentioned earlier but is nonetheless important because many enterprises are embracing AI to support critical business decisions. And in the absence of adequate guardrails and human reviews of AI-generated output, chaos will prevail.

CHROs need to act quickly to plug any gaps

As an executive search professional, it is my view that especially in the past 5-6 years, business leaders have been so occupied with “digital transformation” that competencies and skills related to “risk management” have not been adequately developed. While managing risk may be one of the sections to be completed in strategy documents and business plan presentations, what I see as missing is the emphasis on hiring leaders who have training/experience in planning for unexpected risks and mitigating or managing them by actually rolling out “Plan B” or “Plan C” at short notice. Most hiring mandates are focused on candidates who exhibit the skills to manage growth- but unless risks are identified and managed in time, the growth imperative will inevitably suffer. 

What enterprises need are leaders (including at the Board level) who have what it takes to step in during times of unexpected crises or acute risks (e.g., sanctions, embargoes, armed conflicts cyber-attacks, etc.) and can guide other C-level and senior executives to manage the risks. To do this, companies’ senior leaders, together with the CHRO, must take the following steps:

  • Identify risks to BAU as well as planned growth
  • Assess internal talent and list potential gaps in training or actual experience around managing unexpected risks
  • Implement skill development programs to fill the gaps
  • Hire talent on a priority basis to complement/supplement internal competencies, expertise, and experience.

CHROs need to be proactive instruments of change within their organizations to ensure that businesses can navigate the choppy waters of business growth without running aground or capsizing due to unanticipated risks. 

Drop me an email at lauren@ls-international.com or call me at +34 622270255 to discuss if your enterprise has enough talent in the right places to deal with risk, and if not, how you can plug this vital gap. 

By Lauren Stiebing, Founder of LS International

Premium Article

Please submit to unlock the content.