Posted by Robert Half on 13 April 2016
Every C-suite executive should ask themselves two questions about their business risks for the year ahead:
- Where is 2016 heading on a landscape view?
- What is our susceptibility to risk in that environment?
Pinpointing those business risks is a skill that every board member desires to keep things running smoothly and as expected the business of risk is discussed often. Indeed, operational risk management is regarded as an in-demand discipline which has evolved from a purely box-checking regulation to a vital part of the product and business development mechanism.
So what are the top risks for 2016?
According to the annual ‘Executive perspectives on Top Risks for 2016’ survey by Protiviti and North Carolina State University’s ERM Initiative, there are numerous locations and sources that risk could occur, at macroeconomic, strategic and operational levels.
The survey of 535 board members and C-suite executives were each asked to rate 27 issues providing a business risk using a 10-point individual scale, with a score of 6 or more reflecting an ‘extensive impact’ in the next 12 months. These risks were varied in nature, from concerns about geopolitical, global and economic risks to regulation and technological innovation.
What follows is the top five perceived risks for the year – and what action can be taken to mitigate these risks:
Regulatory changes – 60% significant impact
Top for the fourth consecutive year – indeed, every year that the study has been carried out – the level of regulatory changes and heightened scrutiny that a company may face could depend on many external factors, such as world politics and geopolitical pressures. Every regulatory decision or legislative change made by a government body or quango can have an effect on SMEs and multinationals alike, modifying or completely disrupting the way in which products or services could be delivered.
Action: Regulation changes have been taking place across a range of industries, and often the concern arises when implementing new regulatory changes. The key to minimising regulation as a business risk is to prepare early, and regularly review potential regulatory issues as they present themselves.
Economic conditions – 60% significant impact
The number of potential economic and geopolitical issues that could impinge upon production and operation is too large to quantify. Gas and oil price fluctuations, changing and unclear conditions for global trading, immigration and fear of terrorism are three factors that remain hanging over the future. These large-scale issues might then translate to uncertainty surrounding the viability of suppliers to deliver products, and for consumers to buy them.
Action: The Protiviti report states: “As a result of this continuing concern, companies may be aggressive in seeking new markets and new ways of serving customers to stimulate fresh sources of growth.”
Cyberthreats – 57% significant impact
The cybersphere is a fertile breeding ground for talent, innovation, and exploitation by criminal forces. Numerous global technology superpowers have fallen victim to hacker-driven data breaches, who have siphoned money and customer data and caused major disruption. It is impossible to predict which companies will be next; the only certainty is that it will happen because the rewards of money and notoriety are too great for the transgressors.
Action: No longer are these threats IT issues, and something that can be dealt with by one particular department or even person; these are business issues, where threat management should be dealt with as a business issue.
Those businesses that are successful in dealing with cyberthreat have utilised skilled professionals to gauge potential issues and deal with them quickly. The advent of newer roles such as cyber threat research analyst, now more popular among SMEs, shows that companies are planning to mitigate the dangers of cyberhacking through both prevention and contingency.
Privacy/identity management – 53% significant impact
There is an obvious link to cyber threats, as the positives of any technological advancement for customers can soon be negated if a data breach occurs and customer’s private details are exposed. A small leak might be contained quickly; a larger, more profound attack can simultaneously cause mass disruption, media scrutiny, and a loss of custom that might never be regained.
Action: When implementing an innovative technology solution that will benefit stakeholders and consumers, a careful balancing act must be performed to ensure vigilance towards the safety and privacy of consumer information.
Succession challenges – 52% significant impact
Finding, acquiring and retaining the best talent in a rapidly shifting professional landscape is a worry for HR departments. Many skills that are requisite for implementing change, at short-term, tactical, and strategic levels, are both sought-after and rapidly transferrable from industry to industry. That creates competition and high reward for those employees who can profit, and frustration or threat to those companies left with the second-tier candidates.
Action: If a company is having difficulty finding the best talent then long-term tactical changes need to be put in place to build a talent pipeline, encouraging employees to move to new roles and new challenges. Using interim professionals working on a short-term or project basis can help to streamline the process of change within a company.
Planning for risks
None of these risks can be taken as an individual concern. They co-exist as potential risks, and as such any strategy to mitigate them must take steps to deal with them in multiples. Periodic evaluation of internal and external factors, both now and placed within the company’s tactical outlook for 2017 and beyond, is imperative.
Also of importance is a clear awareness of any innovative technologies that could reduce, or even largely eliminate, risk, balanced against the cost of investment and potential short-term disruption that introducing these technologies could bring. The board should be aware of potential risks facing the company and if one of those risks manifests itself, action should be swift, making sure that the appropriate stakeholders and operatives know what response should be taken.
If your business is experiencing any of the above business risks and would like support on how to manage these risks effectively, get in touch with our Robert Half Management Resources team and ask them about their combined consultancy and interim management offering.