We live in an era defined by recurring crises. When the global pandemic disrupted once-reliable supply chains in 2020, and two years later the globe was hit by an unanticipated energy crisis, businesses of all sizes were forced to reckon with the fact that their risk management practices might not be as robust as they thought. In today's business environment, it's more important than ever for companies to have a clear understanding of the risks they face and to have a plan for dealing with them. That's why business risk needs to be at the centre of the boardroom agenda.
The Era Of Perpetual Crisis
From natural disasters to political upheaval, there's always something that has the potential to disrupt business as usual. The recent sharp increase in the frequency and severity of these events can be traced back to several factors, some of which are interconnected and others that are unrelated.
Talent Shortage
At the start of 2021, it became clear that there has been a growing mismatch between the skills businesses need and the skills workers have. This is often referred to as the "talent crisis." In the UK, there were a record-breaking 1,247,000 job vacancies at the end of 2021, and in the US, job vacancies reached over 11 million. This global trend has many causes, but one of the most important is the increasing pace of change. As businesses adopt new technologies and processes, they often find themselves in need of workers with skills that are in short supply.
To make matters more difficult for business, "The Great Resignation" of 2021 exacerbated the talent crisis by creating a shortage of workers in many industries. The Great Resignation was caused by a combination of factors, including the global pandemic, which caused many workers to reassess their career choices and work-life balance.
Escalating Cyber Attacks
Cyber-attacks jumped 600% during the pandemic and this figure is only expected to grow. By 2025 it’s predicted that cybercrime will cost the world $10.5 trillion annually. This is largely because businesses have become increasingly reliant on technology, and many companies have been slow to invest in adequate security measures. As a result, cybercriminals have had a field day, stealing sensitive data and causing billions of dollars in damage.
The most famous example of a cyber-attack is the WannaCry ransomware attack, which hit more than 230,000 computers globally, costing the UK’s National Health Service an enormous £92 million. But there have been many other attacks that have had a significant impact on businesses, including the NotPetya attack of the same year, which was considered “the most devastating cyberattack in history”.
The Unpredictability Of Digital Assets
The rise of digital assets has created new risks for businesses. These assets, which include cryptocurrencies, digital tokens, and digital art, are often stored on decentralised platforms that are often beyond the control of governments and financial institutions.
While these assets present significant opportunities for businesses, they also come with some risks. The value of a digital asset can drop suddenly and without warning, and there is often no way to recover lost or stolen assets. If a business chooses to venture into this area, it is important to have a clear understanding of the risks involved.
Legislative Changes
Governments around the world are constantly changing the laws and regulations that businesses must comply with. These changes can have a major impact on a company's bottom line, and they often come with little or no notice. As a result, businesses must be constantly vigilant to ensure they follow the law.
One of the most significant changes in recent years has been the introduction of the General Data Protection Regulation (GDPR) in the European Union. This regulation imposes strict requirements on businesses that collect, process, or store the personal data of EU citizens. Businesses that violate GDPR can be fined up to 4% of their global annual revenue.
Make Risk Assessment A Priority
With the number and severity of business risks on the rise, it's more important than ever for companies to assess their exposure to these threats. This assessment should be a priority for boards of directors, as it can help identify potential threats and take the necessary steps to mitigating them.
Hiring a reputable risk management consultant helps ensure that your company is as prepared as possible for the challenges ahead. With a comprehensive understanding of the risks your business faces, you'll be in a better position to make informed decisions about how to protect your company and its shareholders.