The latest enterprise risk management news from around the world

Emerging enterprise risks that businesses need to be aware of

At the start of the year, members of the Institute of Risk Management (IRM) were asked to identify key risk areas for businesses for the year ahead. A broad range of risks were highlighted as potential flashpoints , many of which coincide with risks identified in The Global Risks Report 2016 released recently by the World Economic Forum.

When asked to assess the level of risk that will be at play across 2016, the outlook of those experts surveyed was relatively pessimistic. IRM experts were asked to choose a number between one to 10 (1 being low risk, 10 being high risk) as their prediction of the scale of risk in the global economy in 2016. The majority chose seven when assessing overall risk for the year ahead.

The key emerging risks identified were:

Cybersecurity

As well as being one of the main drivers of risk across 2015, cybersecurity was most often listed as a major and growing risk for 2016 by IRM experts.

“Cybersecurity isn’t going away anytime soon,” says Certified Fellow of the IRM, John Ludlow, from Leading In Risk. “Dynamic and rising threats, emerging data protection regulations and rising stakeholder expectations regarding the level of oversight applied to suppliers and partners, all contribute to the pressure to get cybersecurity right and the anger when things go wrong.”

In order to address the organizational threat posed by cyber risk, cybersecurity needs to become a cross-business and intra-business competency says Mr Ludlow. “This is not something that an IT team in one company can fix on its own.  All functions across a business need to support a comprehensive policy, and trading partners need to align and work together.”

Risk consultant and IRM Board member, Keith Smith says that in 2016, we will enter a new phase in the war against cyber crime. “The view has moved from ‘what tech do we need’ to a more mature perspective of ‘how do we fight this?’ which involves people and their behaviours. Risks high in the business agenda for 2016 will be linked to managing people to prevent loss of data and the consequential loss of reputation. This risk will stay on the agenda as there will be more high profile data leaks in 2016 as companies get hacked.”

Oil price fluctuations and related political instability

Uncertainty in the oil price will be a key issue for the oil and gas sector across 2016 that will affect investments and operations says Mark Boult, IRM Fellow and Director at DNV GL, the oil & gas, maritime and energy risk consultancy.

“Even with the forecast increasing demand for oil, it is expected that supply will continue to be ahead of demand in the short term.  Forecasts generally appear to expect a higher price than today at the end of 2016, however, with no expectation of a return to the pre-mid-2014 levels over the next few years.  As such, financial commerciality risks for operators will remain heightened by a sustained lower and uncertain oil price. This could result in failures of operators in high cost fields or further contraction in the supply chain.”

Boult sees the lower oil price continuing to put upwards pressure on political and disruption risks in oil producing countries which, if not successfully managed, may subsequently impact on the world as a whole.
The risk of a major accident in the oil and gas sector will remain a major focus in the industry across 2016. Boult says, “The increase in severe weather events occurring in parts of the world, along with the challenge of maintaining the integrity of older assets in financially constrained times, are pressures that we need to focus on to manage this risk down.”

Disruptive business models in the financial sector

This could be the year that we see a rise in fin-tech companies entering the insurance market with an Internet or cloud-based offering which fundamentally alters the current business model used by insurers, according to many IRM insurance experts. This would do to insurance, what the entry of low-cost airlines did to the travel industry 15 years ago, fundamentally altering how the insurance sector operates.

Alex Hindson, chief risk officer at Argo Group International Holdings, says insurers can mitigate this risk through the “development of a digital strategy by either internal investment or partnering with key solution providers to protect against this scenario. Insurers need to understand opportunities and threats associated with this development on each company’s product mix and distribution chain.”

Socrates Coudounaris, IRM Board member and senior risk director with RGA UK Services Limited, agrees that we are likely to see the onset of the digital interface in 2016. “Companies are struggling to move away from their traditional business models and become mobile and social media enabled. In order to reach their customers, companies will need to push their boundaries outside the traditional face-to-face engagement.”

Bribery regulation and corruption

We are likely to see a number of high-profile revelations of bribery and corruption across 2016, with more organizations and individuals engaging in bribery, despite the tightening regulations, because they think it may well be a risk worth taking, according to IRM experts.

The only way to address complacency in the face corruption is for companies to review their reward systems for bribery and corruption risk says IRM spokesperson and risk manager Ray Flynn. “At an organizational level, having a completely independent review of anti-bribery and corruption policies and procedures, for adequacy and effectiveness, is the only sure fire way to cut through the complacency which has seen high profile misconduct surface in recent years. 

“All too often people at the top pat themselves on the back for having addressed bribery and corruption only to find that the systems in place weren't as adequate as they thought, with disastrous consequences.”

Ian Livsey, chief executive of the IRM summarises:

“Enterprise risk management cuts across every sector in every country around the globe. Effective risk management underpins the core of governments, businesses and society.

“China recently logged its worst economic performance since the global financial crisis began; there are heightened geopolitical risks in North Korea, Brexit implications, migrant crises and the impact of the increase in interest rates in currencies, commodities and oil prices globally.

“There are great opportunities for our members to influence stable economies - risk is more relevant than ever.”

www.theirm.org



Want news and features emailed to you?

Signup to our free newsletters and never miss a story.

   

A website you can trust

The entire Continuity Central website is scanned daily by Sucuri to ensure that no malware exists within the site. This means that you can browse with complete confidence.

Business continuity?

Business continuity can be defined as 'the processes, procedures, decisions and activities to ensure that an organization can continue to function through an operational interruption'. Read more about the basics of business continuity here.

Get the latest news and information sent to you by email

Continuity Central provides a number of free newsletters which are distributed by email. To subscribe click here.