ARLINGTON, Va., Jan. 10, 2017 /PRNewswire/ -- CEB (NYSE: CEB), a best practice insight and technology company, has identified the major risks that boards, Audit Committees and executives need to prepare for this year. The increase in business complexity and the associated, often hidden, implications of it contribute to several risks that Chief Audit Executives (CAEs) plan to watch closely.

"The smallest Fortune 500 company is now five times larger than in 1990, and as organizations have grown, they have seen significant cost savings," said Malcolm Murray, Audit research leader, CEB. "However, increasing size and geographic spread also lead to complexity, which in turn increases the cost of coordinating activities across the organization. But the implications of complexity are often hidden, making them difficult for executives to assess and manage."

The increase in complexity contributes to several risks that are top of mind for CAEs in 2017:


    --  Third-party relationships: Vendors' access to company data continues to
        grow and organizations struggle to gain visibility into their vast
        vendor networks, which now often include a dense thicket of third,
        fourth and fifth parties. This makes oversight of third-party
        relationships increasingly difficult. Although the use of third parties
        is critical to organizations' success, especially in an era of
        digitization, only 20 percent of organizations have an established or
        world-class third-party governance framework.
    --  Strategic decision-making and execution: As organizations have grown in
        size and complexity, their structures have also become flatter and more
        matrixed. Although speed of execution is a stated goal for many
        executives, the costs of coordinating activities and collecting
        high-quality, usable data across large organizations impede agility.
        This makes strategic decision making and execution more difficult, with
        core business activities taking, on average, 20-40 percent longer than
        five years ago.
    --  Pace of innovation: Rapid digitization has opened the marketplace to new
        competitors, making innovation critical for incumbent companies. But
        years of cost-cutting initiatives have led to risk aversion - in fact,
        77 percent of finance executives cited more risk aversion in project
        funding in 2016. This risk aversion combined with increasing complexity
        means companies have a difficult time fostering innovation.
    --  Change fatigue: The size and scale of global companies also lead to more
        change initiatives that are increasingly difficult to manage.
        Seventy-three percent of executives expect the current rapid pace of
        change to increase further over the next three years, and employees
        already experience 70 percent more change events today than they did
        five years ago. The workforces of many organizations, exhausted and
        overextended after all of this change, are at risk of change fatigue,
        which can lead to a five percent drop in productivity.

"Most executives aren't surprised by these risks, but they struggle to understand what to do about them," Murray said. "The CAE can strengthen corporate assurance by identifying and tracking these risks in the business and help management prepare to mitigate them."

In addition to the hidden costs of growth and complexity, the other risk themes CAEs are watching this year include digitization, volatility in the macro environment and heightened public scrutiny.

CEB creates its annual Audit Plan Hot Spots report by combining input from interviews, surveys and audit planning documents from across its network of member companies. For more information and to download an excerpt of the report, visit CEB.

About CEB

CEB is a best practice insight and technology company. In partnership with leading organizations around the globe, we develop innovative solutions to drive corporate performance. CEB equips leaders at more than 10,000 companies with the intelligence to effectively manage talent, customers, and operations. CEB is a trusted partner to nearly 90% of the Fortune 500 and FTSE 100, and more than 70% of the Dow Jones Asian Titans. More at cebglobal.com.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/complexity-drives-key-business-risks-for-2017-300387969.html

SOURCE CEB