Risk factors: the top five threats to your company

Businesses face all sorts of risks, which need to be assessed and managed. These risks include anything from natural disasters to political upheaval, third-party liabilities or even not being able to attract and attain top talent. Risk management and reinsurance specialist Aon, in its 2017 Global Risk Management Survey, has projected what the top risks for companies will be by the year 2020.

Economic slowdown/slow recovery

There is concern that by 2020 the economic outlook could be looking less than certain. Notable negative risks to activity include a sharper-than-expected tightening in global financial conditions that could interact with balance-sheet weaknesses in parts of the Eurozone, increased geopolitical tensions in some emerging market economies, and a more severe slowdown in China.

Increasing competition

Globalisation and technological developments have intensified competition between businesses. Disrupting technologies and digitalisation has put pressure on businesses to create new products and services at cheaper costs to compete against their peers, while globalisation has increased the pool of companies competing with each other. In Europe, slower growth has also put a strain on some businesses.

Failure to innovate/meet customer needs

Innovation takes massive investments, time and money, but products and services have an unlimited shelf life. A product which might be considered to have a competitive advantage today might no longer be the case tomorrow. Being innovative requires taking risks and companies need to learn from failures in order to grow.

Regulatory/legislative changes

Regulations can potentially have costly burdens on business. Over the years, companies have recognised that regulation is a primary consideration in their business strategies, seeing it as a potential way they can create a competitive advantage over peers who do not manage this process effectively.

Cyber-crime/hacking/viruses/malicious codes

Cyber-crime has now joined a long roster of traditional causes that can trigger costly business interruptions. A survey by the Ponemon Institute found that the annual average cost of a cyber incident in 2016 rose to $9.5million, a 21 per cent net increase over the past year. Phishing and social engineering attacks increased significantly from 62 per cent in 2015 to 70 per cent in 2016. As cyber-crimes become more rampant, more costly and take longer to resolve, companies need to improve their risk readiness.