The Changing Landscape of Business Risk
In the modern era, the pace of business is fast – but the pace of technological change is even faster.
As a result, the landscape of business risks is constantly shifting and changing, and both entrepreneurs and investors need to be on top of the potential factors that could disrupt their chances of success. At the same time, they also need to be prepared to address and mitigate new risks as they crop up.
Today’s Biggest Risks
Today’s infographic comes to us from Raconteur, and it highlights the forces that have been shaping the business risk landscape – both today and as projected for the future.
Using data from the 2017 Global Risk Management Survey done by insurance company Aon, it shows the top business risks according to 1,843 risk decision-makers from 33 industry sectors in over 60 countries.
Here were the top risks from 2017, as well as the corresponding portion of business leaders that said they were prepared for each risk:
| Rank (2017) | Business Risk | Readiness |
|---|---|---|
| #1 | Damage to reputation/brand | 51% |
| #2 | Economic slowdown/slow recovery | 30% |
| #3 | Increasing competition | 45% |
| #4 | Regulatory/legislative changes | 44% |
| #5 | Cybercrime, hacking, viruses, malicious codes | 79% |
| #6 | Failure to innovate/meet customer needs | 59% |
| #7 | Failure to attract or retain talent | 57% |
| #8 | Business interruption | 67% |
| #9 | Political risk/uncertainties | 27% |
| #10 | Third-party liability | 70% |
The insurer noted that many of these top business risks were uninsurable – and that in general, that such risks are continuing to gain precedence.
Future Business Risk
Interestingly, the survey also asked respondents to predict the risks in 2020 based on current trends and conditions.
Here is the same list, but for 2020, including the current ranks as well:
| Rank (2020) | Business Risk | Previous Rank (2017) |
|---|---|---|
| #1 | Economic slowdown/slow recovery | 2 |
| #2 | Increasing competition | 3 |
| #3 | Failure to innovate/meet customer needs | 6 |
| #4 | Regulatory/legislative changes | 4 |
| #5 | Cybercrime, hacking, viruses, malicious codes | 5 |
| #6 | Damage to reputation/brand | 1 |
| #7 | Failure to attract or retain talent | 7 |
| #8 | Political risk/uncertainties | 9 |
| #9 | Commodity price risk | n/a |
| #10 | Disruptive technologies/innovation | n/a |
Damage to risk/brand fell out of the top spot all the way to #6, and two new entrants appear for the first time: commodity price risk and disruptive technology/innovation.
Cybercrime Overconfidence
Raconteur’s infographic also points to the biggest long-term risks to business, and the risks that get the most underestimated. These both come from a 2018 report by German asset manager Allianz, which includes opinions from a selection of risk experts.
The Biggest Long Term Risks
1. Cyberincidents
2. New technologies
3. Climate change/increasing volatility of weather
The Most Underestimated Risks
1. Cyberincidents
2. Business interruption
3. New technologies
As you’ll notice, the risk of “cyberincidents” tops both lists.
This is particularly interesting, because in the previous survey of business leaders, the potential business risk of “cybercrime, hacking, viruses, and malicious codes” was the one that leaders said they were most prepared for, with a 79% readiness level.
Yet, cyberincidents – which have an estimated annual impact of $450 billion per year – are both the top long-term risk and the most underestimated risk according to risk experts in the Allianz report.
