How Trust by Design is the new CEO imperative

In an age of digital transformation, CEOs are helping their companies take risks that enable innovation, speed and new value-creation.

CEOs today have an unenviable job. In addition to architecting strategies to make their companies future-ready – while responding to today’s extreme technology disruptions – they are having to deal with increasing cost pressures, changing customer expectations and geopolitical turmoil. The ability to balance this duality of purpose – making the business more competitive while keeping it out of trouble – is indeed critical to gaining competitive advantage in an age of digital transformation.

EY teams approach to risk management, Trust by Design (TxD), suggests a practical approach to achieving this balance. Instead of just viewing risk through a loss-prevention lens, it offers upside, downside and outside perspectives on risk. In doing so, it helps enable an upfront infusion of risk-thinking into strategic and operational processes, as opposed to bolt-on initiatives that are typically reactive and remedial in nature. This proactive and deliberate approach to designing risk-strategy has the potential to support greater stakeholder confidence and trust.

The TxD approach also aligns with the views of leaders in the recent EY CEO Imperative Study. CEOs, boards and investors from around the world participated in this study and shared their thoughts on global challenges that would impact organizations over the next 5 to 10 years.

Among the various global challenges, leaders rated technology induced job loss as one of the major risks to the global economy and business growth. Income inequality, ethics of AI, cybersecurity and climate change together made it to the top-five list. The survey also provided insights into how organizations are dealing with various upside, downside and outside risks.

Upside risks

CEOs believe that addressing the above global challenges is value-additive to their companies: it can improve their competitive positioning and help attract new or different investors. Creating long-term conditions for business to flourish is also a frequently-cited growth opportunity. Furthermore, CEOs of companies with revenues over US$20b state that aligning their business models and services to help address the above challenges is the top growth opportunity and is tied to attracting the best talent.

Downside risks

Leaders believe a lack of engagement in addressing these challenges could severely impact growth opportunities for their organizations, especially as empowered stakeholders are prepared to reward those who lead in solving problems and punish those who do not. Cybersecurity, for instance, is a widely accepted mission-critical risk that has grave business-continuity implications. Organizational architectures that are built for resilience to security, privacy and other critical risks enhance stakeholder trust significantly. The report suggests several additional downside risks can also impact trust, such as customer alienation or loss of sales, distraction from core business and ethics of AI.

Outside risks

Amongst the top global challenges capable of inflicting outside risks, climate change, income inequality and geopolitical instability are worrying leaders the most. Specifically, the fight against climate change and social injustice is at the top of their agendas. The good news, however, is that the majority of investors are in favor of long-term investments to address these challenges, even if their near-term performance diminishes.