New research from Deloitte has found there is a disconnect between boards' risk appetite and effective strategic planning, which it said is threatening companies' ability to take on risk.

The report, Refocus on Risk to Thrive, was based on interviews with 75 board and management representatives of Australia's largest public and private organisations in late 2020.

It found almost all (93%) of Australia's largest organisations believe the COVID-19 crisis has presented opportunities for them, as they look to 2021.

However, 68% would have higher confidence in achieving their objectives if there was a stronger alignment between strategy and risk appetite.

Deloitte said that while business confidence is at pre-crisis heights, there are justified concerns that Australian businesses are not backing themselves and taking the risks required to thrive.

It said business needs to rethink its approach to risk and more explicitly connect its risk appetite to strategic decisions to make the most of the coming year.

Report principal author Jerome Nyssen said the COVID-19 pandemic accelerated many of the disruptors anticipated by Australian organisations and introduced others that could not have been foreseen.

"These disruptive forces have impacted organisations in very different ways. For some, it has reinforced their strategic plans, enabled an acceleration of their implementation, and driven growth. For many, it has exposed weaknesses in governance, strategy, operating models and culture," he said.

"The changes occurring are presenting opportunities, but in order to realise these opportunities we must gain comfort taking and managing risk in an uncertain environment."

Nyssen said the gap between business confidence and business behaviour is of particular concern.

"Whilst our recent Business Outlook report demonstrates business confidence is now at pre-crisis heights, there are justified concerns that Australian businesses are not backing themselves," Nyssen said.

"Business lending is down, mergers and acquisition deal volumes are down, and share buy backs by listed organisations are up."

The research found four key areas of development that organisations should focus on to give themselves the confidence to take risks.

These include: better alignment of strategy, risk appetite and culture setting processes, improved quality of risk data and risk reporting, increased management accountability for performance within risk appetite and using risk appetite as a tool to influence risk culture.

The research found that many boards have not established clear alignment between their organisation's strategic plans, risk appetite and culture, and this is directly impacting their ability to achieve their objectives.

It highlighted the board and management were commonly disconnected, with management more likely to indicate that their organisation's definition of risk appetite was adding limited value to decision making processes such as strategic planning.

Equally, poor quality risk data, and highly manual reporting processes, have undermined the ability of boards and management teams to make risk intelligent decisions.

This low level of confidence in data quality is driven by the highly manual nature of risk reporting processes, particularly in the areas of non-financial risk which have not been prioritised for digitisation beyond establishment of general governance, risk and compliance applications.

Additionally, the research found management are not clear on how much risk they are prepared to take to achieve their objectives, or how to effectively operationalise the board's risk appetite. Reflective of this, risk appetite is poorly communicated and understood within most organisations.

Finally, the report said boards and management are not clear enough on how to use the definition of risk appetite to influence their organisation's culture and improve their ability to take calculated risks.

It found considerable difficulty is still being experienced in establishing effective and practical frameworks which ensure the alignment of the organisation's strategy, risk appetite and culture.

"The pandemic has shown Australian business the value of clearly defining their risk appetite and using this to inform the strategic decisions they make," Nyssen said.

"With the increasing potential for an Australian economic recovery in 2021, now is the time to build on the lessons learnt from 2020, and build cultures which are comfortable with taking and managing risk.