This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.
The Institute for Internal Auditors (IIA) is a major U.S. accounting organization. They advocate, provide educational conferences, and develop standards, guidance and certifications for the internal audit profession. Currently, they count 214,026 members.
The IIA’s annual report, Pulse of Internal Audit, is based on a survey of over 500 internal audit executives. It identifies key risk areas.
In 2019 pre-COVID times, those risk areas were:
- Cybersecurity and data protection
- Third-party risks
- Emerging and atypical risks, and
- Board and management activity
Fair enough. Now what about next year?
A. IIA’s Top 12 Risks for 2022
The following are identified as the top 12 risks firms expect to face in 2022 (in order of relevance):
- Cybersecurity (QLYS, RDWR, CRWD, PANW)
- Talent Management (PAYC, KFY, MAN, KFRC)
- Organizational Governance
- Data Privacy (Z, FTNT, CHKP, CYBR)
- Culture (THO, WGO, SKY, DHI, LEN)
- Economic and Political Volatility (CVX, COP, BP, EOG, CNQ)
- Change in Regulatory Environment (JPM, BAC, C, KEY, FITB)
- Supplier and Vendor Management (SAP, MGIC, SSNC, PRGS)
- Disruptive Innovation (NVDA, TXN, DINRF, STM, NEE)
- Social Sustainability
- Supply Chain Disruption (MU, WDC, QRVO, AMKBY)
- Environmental Sustainability (MSFT, TSLA, AMZN, AES, FCEL, ENPH)
B. Zacks Ranked Stocks to Play These Risks
I researched Zacks top-down industry-ranking system. As a value-added element inside this IIA table — to show you explicitly where to look for valuable investing plays.
After doing this, I added a set of stock tickers to each of their 12 ranked risks. Type the stock tickers into Zacks.com and look into them further yourselves.
Cybersecurity was the top risk in 2019, and in 2021 COVID times, and maintains that position for 2022’s post-COVID environment.
- Such risks are now heightened as a result of continuing work-from-home scenarios, which some organizations are now making permanent.
- There are less-well known but great tech security companies to play these trends. Look into the stock tickers aligned with #1, #4, and #8.
Also note this: Cybersecurity (#1) and Data Privacy (#4) are well above the Supplier and Vendor Management (#8) and Supply Chain Disruption (#11) risks.
That’s a tell!
Corporates are less worried about supply chain issues next year than you might think. Still worried? Yes, of course. But their managers and CFOs say those risks are not at the top of the list of risks next year. Perhaps consumer and producer price inflation won’t be as sticky as some fear?
Also moving up on the list in 2022 is Talent Management (#2).
Finding, hiring and retaining top talent is more difficult than ever. Many organizations are struggling to maintain full teams.
- The increased ability to hire from any location and work remotely has created additional competition in the talent market.
- Take a look at stock tickers aligned with #2 and #8 for fresh ideas.
Respondents also expect risks related to Culture, Economic and Political Volatility, and Disruptive Innovation to continue to grow in relevance over the next several years. Here, look into #5 and #9 stock tickers for thematic trading and investing plays.
Business Continuity and Crisis Management have fallen off the list since 2021. This may not be surprising, given organizations’ abilities to prepare, react, respond and recover have recently been augmented. Creating more comfort over the capacity to respond to and manage this risk.
C. The Ability to Manage Top Risks
The IIA noted that while this year’s report indicates better alignment among individuals managing risk than what was identified in prior years, there’s still a significant gap between how risk management leaders rate risk relevance versus organizational capabilities in most of the top 12 risks, most notably in Talent Management, Culture, Disruptive Innovation, Data Privacy and Cybersecurity.
In other words, leaders often recognize that these are significant risks to their business. But don’t have confidence in their organization’s ability to effectively manage them.
That means those leaders will have incentives to look outside their firms for help. That motivation may well light the earnings and revenue growth path for stock traders, too.
D. ESG Risks
Sustainability was included as an overall risk last year. But it makes the list in several forms this year, including Organizational Governance, Social Sustainability and Environmental Sustainability.
- Awareness of environmental, social and governance (ESG) risks is increasing as pressure for ESG reporting grows
Challenging these risks at a more detailed level is important. The IIA report showed that leaders find certain of these risks, specifically Organizational Governance, to be more relevant than others.
Respondents also felt that organizations’ ability to manage certain risks were less in line with the relevance of the risk, specifically for Social Sustainability and Environmental Sustainability. Understanding where those knowledge gaps might exist allows for more proactive management of the specific risks.
The risks noted above should be considered as organizations (and stock investors and traders!) look forward to 2022.
- As my stock tickers show, top ESG stocks are the mega-cap stock traders have been showing the love for
Ongoing ESG certification keeps that mega-cap bullish trading fire burning.
Image: Bigstock
12 Key Risks for 2022
This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.
The Institute for Internal Auditors (IIA) is a major U.S. accounting organization. They advocate, provide educational conferences, and develop standards, guidance and certifications for the internal audit profession. Currently, they count 214,026 members.
The IIA’s annual report, Pulse of Internal Audit, is based on a survey of over 500 internal audit executives. It identifies key risk areas.
In 2019 pre-COVID times, those risk areas were:
Fair enough. Now what about next year?
A. IIA’s Top 12 Risks for 2022
The following are identified as the top 12 risks firms expect to face in 2022 (in order of relevance):
B. Zacks Ranked Stocks to Play These Risks
I researched Zacks top-down industry-ranking system. As a value-added element inside this IIA table — to show you explicitly where to look for valuable investing plays.
After doing this, I added a set of stock tickers to each of their 12 ranked risks. Type the stock tickers into Zacks.com and look into them further yourselves.
Cybersecurity was the top risk in 2019, and in 2021 COVID times, and maintains that position for 2022’s post-COVID environment.
Also note this: Cybersecurity (#1) and Data Privacy (#4) are well above the Supplier and Vendor Management (#8) and Supply Chain Disruption (#11) risks.
That’s a tell!
Corporates are less worried about supply chain issues next year than you might think. Still worried? Yes, of course. But their managers and CFOs say those risks are not at the top of the list of risks next year. Perhaps consumer and producer price inflation won’t be as sticky as some fear?
Also moving up on the list in 2022 is Talent Management (#2).
Finding, hiring and retaining top talent is more difficult than ever. Many organizations are struggling to maintain full teams.
Respondents also expect risks related to Culture, Economic and Political Volatility, and Disruptive Innovation to continue to grow in relevance over the next several years. Here, look into #5 and #9 stock tickers for thematic trading and investing plays.
Business Continuity and Crisis Management have fallen off the list since 2021. This may not be surprising, given organizations’ abilities to prepare, react, respond and recover have recently been augmented. Creating more comfort over the capacity to respond to and manage this risk.
C. The Ability to Manage Top Risks
The IIA noted that while this year’s report indicates better alignment among individuals managing risk than what was identified in prior years, there’s still a significant gap between how risk management leaders rate risk relevance versus organizational capabilities in most of the top 12 risks, most notably in Talent Management, Culture, Disruptive Innovation, Data Privacy and Cybersecurity.
In other words, leaders often recognize that these are significant risks to their business. But don’t have confidence in their organization’s ability to effectively manage them.
That means those leaders will have incentives to look outside their firms for help. That motivation may well light the earnings and revenue growth path for stock traders, too.
D. ESG Risks
Sustainability was included as an overall risk last year. But it makes the list in several forms this year, including Organizational Governance, Social Sustainability and Environmental Sustainability.
Challenging these risks at a more detailed level is important. The IIA report showed that leaders find certain of these risks, specifically Organizational Governance, to be more relevant than others.
Respondents also felt that organizations’ ability to manage certain risks were less in line with the relevance of the risk, specifically for Social Sustainability and Environmental Sustainability. Understanding where those knowledge gaps might exist allows for more proactive management of the specific risks.
The risks noted above should be considered as organizations (and stock investors and traders!) look forward to 2022.
Ongoing ESG certification keeps that mega-cap bullish trading fire burning.