2023 Predictions: How close were we?
Rebecca Watson 
Date published: Dec 20, 23
Earlier this year, we released our 2023 Predictions: The year to invest in human capital, exploring eight key trends that we believed would impact organizations operating in regulated or high compliance industries over the next 12 months.
Throughout our research, we discovered a recurring theme connecting all these trends: the success or even survival of businesses in these sectors will be intrinsically linked to how they invest in their human capital. In 2023, we predicted organizations would need to look inward in order to flourish externally and emerge more resilient.
As we begin a new year, it's time to review our predictions. How well did they align with the events and insights of 2023? And most importantly, how accurate were they?
Throwing a lifeline: The cost-of-living challenge
In our first prediction, we outlined how the cost-of-living challenge would become a critical concern, and that businesses might want to consider proactively supporting employees. This was to ensure not only their welfare, but also to protect quality, safety and productivity, as well as manage financial and cyber risks.
Indeed, this year has been marked by high global inflation and market fluctuations, causing living costs to soar further. Unfortunately, wages have not been able to keep up with the rising prices, resulting in financial strain for individuals and families. The Organisation for Economic Co-operation and Development (OECD) reports a year-on-year decrease of 3.8% in real wages across OECD countries during the first quarter of 2023. In the UK specifically, the Bank of England's decision to raise interest rates to 5.25%, the highest in 15 years, has increased mortgage and rent costs, further exacerbating the financial burden on people.
Our report also anticipated the impact of the cost-of-living crisis on workers' performance and how this would affect businesses' operational factors. A recent study on this topic has provided valuable insights into the consequences of financial stress on employee output. The PwC 2023 Employee Financial Wellness Survey revealed that one in three full-time employees say that money worries have negatively impacted their productivity at work. Among financially stressed employees who are distracted at work because of their finances, 56% spend three hours or more per week at work dealing with, or thinking about, issues related to their personal finances.
The BYOD black hole
The use of end-to-end encrypted messaging apps like WhatsApp and Wire and personal devices for work exchanges are on the rise in businesses. So, we expected this to become a greater concern in 2023, particularly for organizations operating in regulated or high compliance industries where an audit trail or quality process often needs to be evidenced.
Data released this year reveals that the global Bring Your Own Device (BYOD) and Enterprise Mobility market is still growing rapidly and is expected to reach a size of US$296.4bn by 2030.
However, the escalating usage is leading to increased scrutiny of corporate BYOD policies and effective record keeping to ensure compliance. This year, the US Department of Justice emphasized that point by threatening more severe penalties if companies do not have clear policies regarding employees' use of personal cell phones and messaging apps. In August, the Securities Exchange Commission (SEC) imposed fines totaling $289 million on 11 Wall Street firms due to their failure to maintain and preserve electronic communication, which the SEC described as "widespread and longstanding failures."
Building resilience from the bottom up
To navigate a rapidly changing world, it is becoming essential for organizations to prioritize resilience and adaptive risk management to thrive in a non-linear environment. In 2023, we predicted that volatility, uncertainty, complexity and ambiguity (VUCA) would no longer be seen as disruptors, but rather the standard conditions in which we now operate. It wasn't just essential for an organization to be resilient, it also needed to consider whether its workforce could be agile in this environment.
Over the past year, businesses have once again faced multiple challenges due to the unpredictable global economy. These include dealing with the lingering impact of the COVID pandemic, supply chain disruptions, rising energy costs and geopolitical instability, such as the ongoing conflicts in Ukraine and Gaza.
This continues to be a significant concern for companies worldwide. In August, we published our Resilience matters: From survive to thrive report, asking industry leaders about their main priorities for strategy and operations in the next 12 to 18 months. When asked about the greatest GRC challenges facing their organization today, the lack of time to implement risk strategies, policies and training emerged as the top concern across regions. Additionally, 22% identified a lack of skills and talent to manage and control risk as the third major challenge.
Looking ahead to 2024, agility will continue to be crucial in navigating the VUCA landscape. Organizations must invest in digital transformation and human capital through reskilling and upskilling teams at all levels to build resilience from the ground up.
Lightening the load: AI, automation and ethics
Despite the inevitability and benefits of Artificial Intelligence (AI) and automation, we predicted that the ethical implications would be a crucial point of discussion in 2023. But even we didn't anticipate the levels to which ethics in AI are still being discussed.
In May leaders of the G7 nations called for the development and adoption of international technical standards for trustworthy artificial intelligence (AI). In November, AI's capabilities and emerging risks were highlighted at a dedicated global AI Summit, led by UK Prime Minister Rishi Sunak, which saw international tech and business leaders gather. A major outcome of the summit was the launch of the world’s first AI Safety Institute which will be tasked with testing the safety of emerging AI types.
The European Union also reached a provisional agreement on the EU Artificial Intelligence Act in December. The proposed legislation would be the world's first comprehensive law regulating the use of artificial intelligence. It therefore still remains prudent for organizations to scrutinize the ethics of any AI they introduce.
ESG Anarchy: the fine line between sustainable and 'greenwashed' supply chains
As demand for green credentials and sustainable supply chains boom, so does the potential risk exposure for organizations publishing sustainability-related pledges. Being labelled as a company that engages in "greenwashing" can deeply fracture the relationship with all stakeholders and irreparably damage trust. Therefore, we predicted that 2023 would be a real test for businesses measuring their environmental, social and corporate governance (ESG).
A crucial step towards the standardization of ESG reporting occurred in June 2023, when the International Sustainability Standards Board (ISSB) issued new guidance. The inaugural global standards, IFRS S1 and IFRS S2, aim to "improve trust and confidence in company disclosures about sustainability to inform investment decisions."
The UK government released an updated Green Finance Strategy on March 30, 2023, which includes plans for a UK Green Taxonomy. This tool is intended to "provide investors with definitions of which economic activities should be labelled as green."
The forgotten frontline – using data and technology to protect from afar
In 2023, we anticipated that there would be a significant focus on how companies manage remote and hybrid working from a data and compliance perspective.
According to Gartner® "By the end of 2023 39% of global knowledge workers will work hybrid, up from 37% in 2022." Their insights also revealed that: "The US number of fully remote and hybrid knowledge workers will account for 71% of the US workforce in 2023. In the UK, fully remote and hybrid knowledge workers will represent 67% of its workforce in 2023.” *
As the shift towards hybrid work models becomes more permanent, our 2023 predictions report noted that ethical codes traditionally upheld in office environments need to be more explicitly communicated to remote workers. The relaxed atmosphere of home environments may inadvertently lead people to lower their guard, increasing the risk of carelessness around information security, especially in multi-occupancy homes. In its Cyber Threat Report: UK Legal Sector, published in June, the UK's National Cyber Security Centre (NCSC) highlighted how the widespread adoption of remote working within law firms has increased risk from a cyber security perspective.
Additionally, we predicted that wearable technology, smart factory floors and handheld devices would likely be increasingly adopted as another way organizations put their arms around offline workers providing actionable real-time data. New findings appear to support this, with the global wearable technology market size, valued at USD 138bn in 2022, predicted to surpass around USD 491.74bn by 2032.
Wellness as a metric - employee and annual turnover
Recruitment costs, poor productivity costs and vacant roles have financial and operational implications. Therefore, happier, healthier and more engaged employees deliver better returns and productivity. In light of this, we envisioned that 2023 would see employee wellness as a metric being more important than ever.
Based on the Health and Wellbeing at Work survey by the Chartered Institute of Personnel and Development (CIPD), more than 50% of UK organizations reported having a stand-alone wellbeing strategy in 2023.
Similarly, Deloitte's Advancing Workforce Well-being study predicts this trend will continue. The data, released in June, found that executives increasingly recognize the need for accountability regarding workforce wellbeing. In fact, 85% of the C-suite say they’ll become more responsible for workforce wellbeing over the next few years. At the same time, 85% of executives believe organizations should be required to publicly report their workforce wellbeing metrics, but only around half are currently doing this.
2023 has also seen new rules come into effect that prioritize not only employees’ physical safety but also emphasize the importance of psychological health. In Australia, the Work Health and Safety (National Uniform Legislation) Regulations 2011 (the WHS Regulations) have been amended to address psychosocial hazards in the workplace. Organizations have also faced scrutiny this year due to "toxic workplace cultures" directly affecting the psychological health of employees. In October, Court Services Victoria (CSV) was convicted and fined by Melbourne Magistrates' Court for failing to provide and maintain a safe workplace.
Shifting to a risk-based legislation mindset
In our 2023 predictions report, we also highlighted that regulators and standards bodies are increasingly commenting that in our quest to be compliant, we’ve fallen into the false security of box ticking as a solution to risk management. Most standards have always required an element of ‘scenario thinking’ but the fear of not being compliant has in some cases led to literal thinking that creates risk.
Risk-based isn’t true of all parts of compliance: some regulations and laws are hard and fast in their requirements, but in many cases the lines have become blurred, and guidance is being interpreted with rigidity. As such, we expected that standards bodies would publish revisions or new editions to impress the point that companies need to actively think about risk and mitigation.
As we enter 2024, the trend of adopting a risk-based mindset within highly regulated industries remains strong due to the volatile economic conditions. Organizations must empower their teams with critical thinking skills to effectively manage risks.
The focus on AI and cybersecurity throughout the previous year has reinforced the importance of prioritizing risk management strategies. As technology advances, so do the threats, making proactive risk mitigation crucial for businesses. Unsurprisingly, when we asked industry leaders about their top priorities for the next 12 to 18 months in our Resilience matters: From survive to thrive report, enhancing the efficiency of risk and compliance management claimed the top position with 26%, closely followed by embedding a stronger risk and compliance culture at 19%.
What’s in store for 2024? Download your free copy of our 2024 Trends report: The year to invest in trust here.