Equipment failure, cyber attacks and natural disasters are the top three operational risks to have negatively affected business operations, according to a FM Global-commissioned study.
Sixty-six percent of financial executives surveyed say their organizations have been harmed by equipment failure, nearly 60 percent say their firms have been impaired by data breaches or cyber attacks, and more than half (52 percent) have had their operations affected by natural disasters. Yet the majority (54 percent) say their organizations have not developed or tested formal loss-recovery plans.
The study, ‘Finance’s Role in Operational Risk Management: CFO Research on Building a Resilient Company’, also highlights:
Low levels of preparedness for operational risk events: only 34 percent of financial executives believe their firms are very well prepared to recover from an equipment failure. Just 33 percent feel their organizations are very well prepared to recover from a natural disaster, while merely 24 percent feel their companies are very well prepared to recover from a data breach/cyber attack.
The CFO’s increasing perception of risk: almost 70 percent of financial executives are concerned that their revenues or earnings will become more vulnerable to operational risk over the next two years, and nearly 60 percent say the need to manage operational risks will make it more difficult to meet revenue and earnings targets over the next two years.
Focus on protection from operational risk in the near future: 41 percent of financial executives say they will place more focus on preventing losses from operational risks over the next two years, with nearly the same percentage of respondents saying loss prevention and mitigation is more important than insurance coverage.
The need for increased resilience in the future: overall, the study found a need for improved resiliency in the future. Eighty-six percent of respondents say their companies will need to be more resilient in the future.
The study research is based on responses received during late 2016 from 100 chief financial officers or senior most financial executives at US-based companies, the majority of whom are from Fortune 1000 organizations across a wide variety of industries.