Agile Risk Management in the Age of AI and tariffs

Traditional risk management is static and linear: identify risks in advance, asses them, and plan to reduce their probability and fallout. The success depends on accurately identifying risks at the start of a project. But that is becoming hard because of evolving uncertainties due to geopolitical and technology volatility: the latter - which is driven by developments in AI - will test many industries.

To deal with the rapid and unanticipated disruptions in all dimensions of a business, the risk management strategy need to adopt agile processes. Agile risk management is specially relevant to a business that has a hybrid nature; one that combines software and goods to deliver a product. For such businesses, the uncertainties of AI and the reliability of the supply chain or distribution network will impact operations, IT, finance cascading to the whole business model.

Agile concept is not foreign to many companies. They have adopted agile software development or agile approach to front-line customer facing processes to meet their customer’s changing needed and expectations. Such processes are error-tolerant and nimble in nature, which works well in fast-changing business environment with evolving external dependencies. So agile risk management won’t be foreign or incongruent with the hybrid organization model of many businesses.

In fact, agile risk management is better positioned to predict, process and plan for evolving uncertainties ensuring minimum preparedness at all times. The risk planning process becomes iterative, and mitigation strategies evolve to focus on the emergent risks, prioritizing those with highest probability and impact.

Companies can start with an iterative evaluation and categorization of risks to better understand their severity and impact as risk dependencies change or new risks emerge. Coupled with this, they can adopt agile decision making to reallocate resources more effectively in order to maintain risk safeguards as technology and geopolitical conditions evolve.

As changes become more frequent, an agile risk management process improves resiliency, which is critical to staying competitive and profitable in today’s uncertain markets.