Doing business these days is much different compared to yesteryear, and that includes risk management. No longer are businesses solely vulnerable to local circumstances; instead, with business taking on a global marketplace, the risks are much more vast and evolved. And as such, risks have become more difficult to anticipate and plan for.
The risk manager of today has the unprecedented task of forecasting the myriad of risks associated with modern business landscapes, and responding quickly and effectively should a risk rear its ugly head.
Here are the most feared risks among businesses of today that could potentially become troublesome issues in 2016, and well into the future.
Among the most concerning risks for companies is the interruption of business and supply chain processes. According to the Allianz Risk Barometer annual survey among global companies, business interruption rates is the predominant concern for 2016. In fact, 38 percent of the respondents voted business interruption as the risk they most dread.
With an increasing amount of financial losses being reported as a direct result of business interruption, it’s no surprise that this risk is topping the charts. With so many businesses interconnected on an international level, whatever happens in one part of the world can easily have a trickle effect on others.
Along with the increasing interdependency of a host of business niches and processes comes growing exposure to more disruptive situations. Unfavorable scenarios can quickly proliferate, and one consequence can easily lead to many more.
Risk management needs to take this new reality into account. Identifying any level of interconnectivity among global branches affected early on can help to offset potential losses. Such risk management also needs to involve ongoing communication and collaboration within international business offices to appropriately and effectively deal with today’s business risks.
The survey conducted by Allianz Risk Barometer also discovered that market developments are cited as the second biggest risk among modern-day businesses. Market developments include factors such as heightened competition, and market volatility and stagnation. This is of particular concern among businesses in the engineering, financial, manufacturing, transportation, and pharmaceutical sectors.
Companies within these industries are facing an increasing number of new and more far-reaching challenges caused by a growth in interconnectivity, automation of processes, and technologically digitalized platforms.
As established businesses continue to grasp these modern factors and the risks they present, these companies must also deal with savvy start-ups that are introducing more contemporary products and services, and means of doing business. Competition is fierce these days, and businesses need to be creative in how they choose to compete and remain relevant.
Considering the fact that digital technology has infused its way into just about every aspect of life and business, it makes sense that cyber security would be a major concern. Along with the positives associated with digital platforms come the downsides, which are cyber attacks.
Plenty of news-worthy cyber attacks made headlines over the last couple of years, including the security breaches on Target, Ashley Madison, and even the US government. Such attacks cost companies billions of dollars, tarnished reputations, and even ruined lives. The concern over this risk increased significantly over the past year, with 28 percent of the respondents on the Allianz Risk Barometer survey ranking cyber attacks as a dire threat.
While businesses are much more aware of the possibility of cyber attacks and the drastic consequences they incur, many are still underestimating their effects and are not adequately armed with cyber security safeguards. Whether it’s a result of budget restraint or lack of knowledge about cyber attacks, the reality is that not all businesses are fully armed and able to withstand such incidents.
Considering the heightened risk of cyber attacks, businesses need to dedicate capital and resources to buy better hardware, implement more effective processes, and improve training among personnel.
While business interruption, market developments and cyber attacks ranked on the top of the list according to the survey conducted by Allianz Risk Barometer, other risks still remain. Natural catastrophes and changes in government legislation round off the top 5 business risks for 2016, followed by macroeconomic developments, blemished reputation, fire, political uproar, and theft.
Regardless of the specific risk, it’s imperative for businesses in every industry and of every size to ensure that proper insurance services are in place, and effective risk management practices are established. Such practices need to reflect the threats of today, which have certainly evolved from the days of old.