Research and advisory firm Info-Tech Research Group has published its newest industry blueprint, Build an IT Risk Taxonomy. This data-backed resource aims to help organizations to become more flexible and agile to adapt to changing business conditions, according to the company. 

“Managing emerging risks such as climate risk, the impact of digital disruption on internal technology, and the greater use of third parties will require IT leaders to be more disciplined in how they manage and communicate material risks to the enterprise,” says Donna Bales, principal research director at Info-Tech Research Group.

“Establishing a hierarchical common language of IT risks through a taxonomy will facilitate true aggregation and integration of risks, enabling more effective decision making.”

Info-Tech’s blueprint highlights the challenges IT departments face in managing and addressing risks. These challenges include business leaders who are seeking to make informed decisions and expect timely and consistent risk reporting from IT. The constantly evolving threat landscape also adds complexity, requiring IT risk managers to balance the emerging threats while not losing sight of the current risks.

The firm’s research explains that developing a relevant and detailed IT risk taxonomy over time can be particularly challenging and that gaining acceptance and promoting accountability within the organization may pose further obstacles. However, involving business leaders and risk owners in the development of the IT risk taxonomy can enhance organizational acceptance and understanding.

In the new resource, Info-Tech advises that risk management must also mature as technology and digitization continue to advance. To strengthen operational and financial resiliency, organizations must move away from a siloed approach to IT risk management toward an integrated approach.

Without a common IT risk taxonomy, effective risk assessment and aggregation at the enterprise level is not possible. The firm’s blueprint outlines an IT risk taxonomy approach that can provide a common language to enable more efficient risk aggregation and interoperability between IT and the enterprise. The recommended approach includes the following three phases:

1. Understand Risk Management Fundamentals: IT departments must take a collaborative approach when developing an IT risk taxonomy to enable greater acceptance and understanding of accountability.
   
2. Set the Organization Up for Success: Risk managers must invest sufficient time in conducting a comprehensive analysis of the existing and future threat landscape when defining level 1 IT risks and consider the causal impact and complex linkages and intersections.
   
   
3. Structure an IT Risk Taxonomy: IT risk managers must recognize the dynamic nature of the threat landscape and acknowledge that an IT risk taxonomy is a living document that requires regular review and enhancement to ensure its ongoing relevance and effectiveness.

“This holistic, disciplined approach to risk management helps to promote a more sustainable risk culture across the organization while adding greater rigor at the IT control level,” explains Bales.

As the risk landscape continually evolves, there is greater pressure on the risk function to work collaboratively throughout the organization to strengthen operational resilience and minimize strategic, financial, and reputational impact. A successful risk taxonomy is forward-looking and codifies the most frequently used risk language across an organization.

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Despite global economic uncertainty, innovation rose as a top corporate priority for 2023. According to a new report released today by Boston Consulting Group (BCG), 79% of companies around the world see innovation as a top-three priority for this year and 66% plan to increase spending—42% by more than 10%. This is in stark contrast to the last downturn in 2009 when fewer than two-thirds of companies ranked innovation as a top-three priority and only 58% planned to increase spending.

For its 17th Most Innovative Companies report titled, Reaching New Heights in Uncertain Times, BCG examines how leading companies are raising their commitment to innovation, and how innovation is building their resilience to economic uncertainty. The report draws on the firm’s annual survey of more than 1,000 global executives on innovation trends and its global innovation performance database of more than 1,000 companies.

“The connection between innovation, growth, and advantage is stronger than ever,” said Justin Manly, a BCG managing director and partner and a coauthor of the report. “The companies that both prioritize innovation and make sure that they are ready to act will continue to widen their lead and deliver outsized returns.”

The 50 Most Innovative Companies of 2023

Despite the market headwinds that they experienced in 2022, tech companies continue to dominate the top 50, including five of the top ten slots. For the third consecutive year, Apple holds the top spot on the list. Tesla climbs three positions to second place, and Amazon remains at third. Nine new companies join the top 50. In addition, international energy companies hold five spots, possibly reflecting survey respondents’ concerns over climate change and the fact that they’re looking to the energy industry to be a creative part of the solution.

The 50 most innovative companies for 2023 are a geographically diverse group, roughly evenly split between North America and the rest of the world. Europe and Asia are well represented, and the Middle East joins the list for the first time.

BCG’s report also underscores the role innovation plays in driving performance. Since 2005, BCG’s portfolio of the 50 most innovative companies has outpaced the broader market in shareholder returns by a significant margin—an average of 3.3 percentage points per year.

Companies Are Investing in AI More Than Any Other Technology

Artificial intelligence (AI) is rapidly expanding innovation possibilities, and companies’ investment priorities reflect this: 61% of companies are investing in AI and machine learning this year. This is 15 percentage points higher than robotics and process automation, which survey respondents selected as the second most attractive technology for investment.

However, while 83% of these firms have systematically implemented AI to support innovation in one or more use cases, only 45% have managed to translate this into business impact.

Those select companies that ultimately realize impact from AI become idea-generation powerhouses. They generate more than five times as many ideas than others and incubate more than twice as many minimum viable products.

“The best innovators develop a self-reinforcing, virtuous cycle. AI is a great example of this—more ideas means greater likelihood of finding the best use cases for AI, and implementing AI helps generate more ideas,” said Michael Ringel, a BCG managing director and senior partner and a coauthor of the report. “Once the innovation cycle starts, it creates its own momentum and produces transformative competitive advantage.”

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