Yet those risks aren’t going to diminish anytime soon – indeed, according to a new survey, the global business community as a whole is worried that weight of risk to their operations, especially on the regulatory front, is only going to increase.
According to the new Executive Perspectives on Top Risks for 2013 survey conducted by global consulting firm Protiviti and the Enterprise Risk Management Initiative at North Carolina State University's Poole College of Management, the top risks corporate leaders see on the horizon include: the effect of regulatory changes combined with heightened regulatory scrutiny on product and service offerings; global economic conditions that are significantly limiting growth potential; and an unstable political climate in different markets worldwide.
Provtiviti’s survey, which polled over 200 board members and C-level executives across a wide variety of industries worldwide, were asked to rate a list of 20 “risk issues” they will face in 2013 on a scale of 1 to 10, with a “1” indicating "no impact" and 10 indicating "extensive impact."
Here’s what those executives said are the top 10 risks they face this year:
- Regulatory changes and heightened regulatory scrutiny may affect the manner in which our products or services will be produced or delivered: 6.8 out of 10
- Economic conditions in markets we currently serve will significantly restrict growth opportunities for our organization: 6.5 out of 10
- Uncertainty surrounding political leadership in national and international markets will limit growth opportunities: 6.0 out of 10
- Organic growth through customer acquisition and/or enhancement presents a significant challenge: 5.5 out of 10
- Succession challenges and the ability to attract and retain top talent may limit our ability to achieve operational targets: 5.5 out of 10
- Anticipated volatility in global financial markets and currencies will create challenging issues for our organization to address: 5.4 out of 10
- Cyber threats have the potential to significantly disrupt core operations for our organization: 5.4 out of 10
- Ensuring privacy/identity management and information security/system protection will require significant resources for us: 5.4 out of 10
- Resistance to change will restrict our organization from making necessary adjustments to the business model and core operations: 5.2 out of 10
- Our existing operations may not be able to meet performance expectations related to quality, time to market, cost and innovation as well as our competitors: 4.9 out of 10
“The executives surveyed clearly understand the commitment and resources required to manage the new regulatory world they do business in, and the significant risks, both financial and otherwise, to a non-compliant approach,” she said. “The respondents to our survey also clearly indicated their concern about identifying new areas for growth, given the economic conditions in the markets their companies currently serve.”
[FYI: Protiviti will host a free webinar to further explore the survey results on Wednesday, March 13, 2013 at 2:00 pm Eastern time. You can register for it by clicking here.]
According to Mark Beasley, director of the ERM Initiative at NC N.C. State, the growing number of companies that have operations in foreign countries and more dependency on a global economy has increased the need to anticipate and manage risk around political uncertainties and volatility in global financial markets.
"While the largest companies may often seem to have the greatest international exposure to these risks, the reality is that few organizations are immune to the vagaries of the global economic and financial markets and the related impact on demand, rates, credit availability and currencies," he explained.
Overall, most executives polled by Protiviti rated the current environment as “significantly risky,” with the majority saying they are likely to make changes or deploy more resources during the next 12 months to manage their respective risks.
Not surprisingly, perhaps, information security breaches and cyber threats that have the ability to disrupt core operations ranked high on the list of risk challenges within Protiviti’s survey – and that view is shared by the President Obama, no less, who unveiled an executive order to beef up cybersecurity measures during his State of the Union speech this week.
“America must … face the rapidly growing threat from cyber attacks,” Obama said during his address to Congress.
“We know hackers steal people's identities and infiltrate private e-mails. We know foreign countries and companies swipe our corporate secrets. Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, [and] our air traffic control systems,” he noted.
“We cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy,” the President stressed. “That's why, earlier today, I signed a new executive order that will strengthen our cyber defenses by increasing information-sharing and developing standards to protect our national security, our jobs, and our privacy.”
However, many experts believe what President Obama is proposing in terms of enhancing cybersecurity falls well short of what’s truly needed – which in turn keeps the risk exposure from cyber attacks heightened for the business community.
“The proposed Cybersecurity Framework falls far short of a pertinent and concrete solution to a problem that should have been addressed ten years ago,” noted Michela Menting, cyber security senior analyst at consulting firm ABI Research.
“The U.S. is clearly at a stalemate, with the government floundering in a hotly politicized deadlock with trade lobbies and civil liberties advocates,” Menting emphasized. “In comparison, the European Union is plugging ahead, building a resilient cyber fortress around its critical infrastructure. Hostile nations are picking the information superhighway apart and the U.S. risks losing a very costly digital advantage if it doesn’t set its house in order soon.”
"We agree with the administration that the security of cyberspace is a national imperative. However, the order complicates this by failing to recognize that cybersecurity is a shared responsibility,”added Craig Silliman, Verizon’s senior VP for public policy in a statement following the President’s speech.
“Federal legislation is necessary,” he said. “Verizon supports bipartisan, consensus-based legislation that boosts ongoing cybersecurity efforts by promoting the sharing of cyberthreat information among communications companies and federal agencies, and provides appropriate liability protections and consumer privacy safeguards.”
And that, my trucking friends, is just one example of why analyzing and then addressing all the risks facing the business world in days ahead is only get to get more complicated – with the price of failure getting only more exorbitant as well.
"The results of our survey are a staunch reminder of the need to devote more resources to risk management and risk oversight, including greater investment in internal controls," stressed Jim DeLoach, a managing director with Protiviti.
"The complexities and risks within the global business environment will only continue to expand,” he added. “That’s why it is imperative that corporate leaders and their boards continue to have the right insights and tools to help them manage the developments and emerging issues that surround a very dynamic regulatory, economic and political environment."
