Making hidden risks a side issue
Do you understand every aspect of your business and the risk associated with it? While we may be comfortable in saying that we have a pretty good handle on this, there are always those risks that come out of nowhere and cause havoc to your operations.
In a world that is increasingly interconnected, this can have a major impact on your business. Clients deal with businesses that pride themselves on ethical behaviour, client service and brand reputation; all of which can take a nose dive if unpredictable risks are not prepared for.
Shadow games
While a lot has been said about the effects of cyber-crime on businesses, many companies might be surprised to find that this is still one of the highlighted issues in AON’s Undetermined Threat Report for 2015.
While AON has acknowledged that cyber risks are a major challenge affecting companies, they also said that it is still largely misunderstood. According to the Underrated Threat report, 58% of surveyed companies said they have not completed a cyber-risk assessment, yet the risk readiness score for cyber risks stands at 82%.
This may seem very contradictory, so AON approached Executive and Non-Executive Directors of companies to determine whether their company’s readiness for cyber risks is overstated.
The report shows that the answer is a resounding yes. According to the report, nine out of ten respondents have validated the report’s assessment that cyber risks is still not fully understood and has great potential for growth in the coming years. Seventy-eight percent of Executive and Non-Executive Directors have indicated that the risk readiness level for cyber risks has, or may have been, vastly overstated.
Cyber risks are no longer considered an emerging risk, but its rapidly changing nature still confounds many. A few years ago, it was criminals aiming predominantly at financial gain by stealing personal and company data. Now, extremist groups use cybercrime techniques to damage companies’ and governments’ reputations by stealing and publishing confidential information. As motivations for cyber-attacks have evolved, so has their effect, creating additional layers of new, interconnected risks.
Future projected danger
To illustrate the unpredictable nature of risk is to look at the possible impact it can have on companies in the future.
According to the AON Report, with the rapid development of media technology and heightened awareness of multiculturalism in recent years, there has been a dramatic increase in the number of ways a company’s reputation can be damaged. These may include:
- offensive images in advertising;
- inappropriate remarks by top Executives;
- massive data breaches;
- large-scale product recalls;
- mysterious plane crashes, and;
- compliance failure.
The risk of reputational damage is dynamic and cannot be placed within specific boundaries; this is mainly due to the fact that interconnectivity means that the public always have access to a forum where they can either spread positive or negative feedback regarding your brand.
Companies must now operate under the assumption that any incident could potentially harm their reputation and brand, and that such threats are lurking around nearly every corner.
Deliver on trust
At the foundation of every successful business is trust. This hinges on the fact that the company acts within defined and well-structured ethical boundaries which are drafted and implemented by top levels of management.
While this has always been the case, clients are arguably paying more attention to ethics now than they have in the past. And this goes beyond the products you are offering them. People want to know how clients in general are being treated by companies. Unethical behaviour can severely damage a company's brand, resulting in loss of income and talent.
The tie that binds
How does this all tie in together? Well, we are all competing for the same pool of business; which in current economic conditions is not as lucrative or as large as it used to be.
In an effort to seek new areas of business, many companies have looked to expand their businesses north into Africa. But they are not alone in this strategy as international companies are also spreading their wings.
The report shows that in recent years, companies in the developed markets have intensified their efforts to integrate into the global market so they can harness new trade and investment opportunities. At the same time, they have to compete with companies in the emerging markets to capitalize on the growth of new middle-class populations and employee talents in those countries.
Editor’s Thoughts:
The insurance industry has been around for many years in South Africa, and has operated quite successfully in an environment that has seen dramatic change over the years. Companies need to, as always, be aware of their surroundings as a risk that is high on the company’s radar may also be a hidden risk if it is not understood properly. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
