Best Practice Guide
Why ramp up risk management today
Nowadays, a business interruption is a matter of when not if. Over the last decade, the topline risk of disaster- related closings of business facilities has only increased, while business interruptions themselves have become more expensive for companies to recover from. More concerning still, interruption isn’t the only serious business risk requiring sustained senior management oversight. From public and operational security to occupational health and safety, the ranks of significant risk continue to grow, as the wider macroeconomic environment just gets more difficult for business.
Risk scholars Howard Kunreither and Michael Useem offer a few reasons why. They highlight a number of important, cross-industry trends that are exacerbating business risk across the globe. Those trends include growing interdependency, shorter-term (management) thinking, increased regulation, greater geographical clustering, higher probability of systemic shock, and new calls for transparency, spurred on by advances in information and communications technology.
Predictably, in advanced economies, we see a high correlation in risk profile(s), including a high incidence of relatively new risks. In the U.S., for instance, the top three risks now include cyber incidents, business interruptions, and natural catastrophes-the latter appears after the record-breaking 2017 storm season, which is linked to climate change and the increasing volatility of weather. Major risk in the U.K. is similar, except changes in legislation and regulation replace natural catastrophes in the top three. After all, the country is negotiating its exit from the European Union. Meanwhile, Australia’s top three risks are the same as the U.K.’s.
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