Four assurance mega-trends shaping risk management

For business leaders, the idea of a world changed forever is giving way to a new reality – a world forever changing. As Paul Butcher, chief executive officer at LRQA, explains, the implications for risk management are dramatic and, as a result, businesses are looking beyond compliance, exploring how safety, security, sustainability and social responsibility are monitored and managed across their operations and supply chains 

This reassessment of risk mindset is being driven by three major factors. First, the realisation that no amount of scenario planning can prepare a business for a true black swan event. Second, the subsequent and fundamental shift in supply chain dynamics, as disruption and shortages see companies struggling to source materials and distribute their products and services. And, finally, the rapid evolution of digital technologies and data in driving risk management practices themselves. 

On this last point, an obvious example of digital evolution was the rapid shift to remote audit and remote inspection – processes that now underpin supply chain and operational standards for companies worldwide. 

When the Covid‑19 pandemic hit and face-to-face operations were no longer an option, that LRQA had a global plan for digital delivery already in place enabled it to move faster than most – but, even so, the speed of change has been dramatic. More than one year later, half of the audits it undertakes blend face-to-face and technology-led solutions. 

There is no doubt Covid‑19 forced the pace of change; however, it is also clear the market is ready for a more agile, transparent and responsive approach to business assurance. Leading its sector towards a truly digitally enabled future is central to LRQA, and is underpinned by following four core beliefs about the future of assurance and risk:

1. Assuring the digital is as important as assuring the physical 

The rapid adoption of technology across supply chain management has significant implications for assurance. One example in the UK is Secure Quality Assured Logistics for Digital Food Ecosystems  – known as SecQuAL – a consortium project led by LRQA through which manufacturers, supply chain innovators and data specialists are developing technologies and systems to digitise the provenance and transparency of the food supply chain. The project underlines the huge potential for the Internet of Things, and sensor and tagging technology to positively evolve assurance processes. As this has happened, it has become as important to assure data that flows though supply chains as it is to assure the products themselves. 

That’s why, in 2018, LRQA acquired Nettitude and, with it, 15 years of cyber security expertise. Through Nettitude, it can advise clients and help protect them against dynamic cyber attacks and vulnerabilities, while designing new standards and approaches to data security that will support future digital assurance activities.

2. The changing nature of supply chains 

Throughout the pandemic, we saw how quickly the uncertainty around remote auditing disappeared, with the vast majority of LRQA’s clients and auditors reporting that the experience has met or exceeded expectations. New and emerging technologies will only enhance this, with drones, robotics and virtual reality promising to make auditing more robust and less disruptive to businesses. 

Technology is disrupting the very nature of supply chains themselves, with huge implications for how we ensure the safety and integrity of products. As the pace of innovation makes it increasingly difficult for regulation to keep up, businesses are having to bring an innovation mindset to the assurance and safety of their manufacturing. Nowhere is this more apparent than in the field of additive manufacturing (AM).

As AM technology extends into safety-critical applications, being able to meet safety and quality standards will be key to fulfilling the technology’s potential. Anticipating this, LRQA has developed guidance notes that are paving the way for the safe adoption of AM processes, providing companies with a framework for achieving certification as they respond to the rapidly changing environment in industries such as construction, automotive, energy and aerospace.

3. The impact of data analytics on risk management strategies 

Advances in cognitive technologies, artificial intelligence and data analytics are helping organisations detect, predict and prevent risks in a much smarter way. From the food on our plates and the clothes on our backs to the devices in our pockets, manufacturers and retailers need to be able to deliver transparency and traceability across the supply chain. As a result, companies are looking to their product recall, product failure and supply network audit data to give them an edge.

The challenge when faced with terabytes of data is to know which data sources matter most to product and brand integrity. By teaming LRQA’s sector-specific experts in compliance and assurance with data managers and scientists, we are building new tools to improve intelligence and create insights and models that predict the likelihood of specific risks.

These models can only improve and, as we look further forward, moving beyond first-party data to a more collaborative approach across industries. If the understandable reluctance to share data between businesses can be overcome, the potential for gains in safety, sustainability and performance are considerable.

4. The environmental imperative 

Where data and technology are accelerating supply chain transparency and integrity, companies are also reassessing the role and value of more traditional processes, such as certification. Many are finding that management systems such as ISO 14001 (on environment management) or ISO 50001 (on energy management) not only offer the opportunity for continual improvement, but are a foundation for what is fast becoming the necessity of verified reporting.

As was evidenced at the 2021 UN Climate Change Conference (COP26), there has never been a greater need to demonstrate transparency, action and progress. With digitally enabled and more traditional forms of assurance offering an effective way for companies to take control of this agenda, aspirations, targets and commitments are turned into tangible, independently assured outcomes. 

These four assurance mega-trends were very much at the forefront of minds as LRQA embarked on the recent rebranding of its business. They define its mission to be the assurance provider that helps its clients negotiate an ever-changing risk landscape – offering a strategic partnership to clients, fully enabled by technology. 

LRQA aims to achieve not just compliance, but a holistic approach to risk management and a robust foundation for sustainable business growth.

 

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