What the Global Risks Report reveals about challenges for UK businesses
- The World Economic Forum’s Global Risks Report, published in partnership with Zurich, identifies some of the major risks facing organisations across the globe
- UK businesses face many of the same challenges as their counterparts in other parts of the world, including evolving cyber, geopolitical and weather-related risks
- Zurich explores the major themes identified in the Global Risks Report 2019
The Global Risks Report 2019, published by the World Economic Forum in partnership with Zurich, identifies the major challenges and risks facing the world in the year ahead.
The UK is not immune from the social, political and technological challenges facing the rest of the world, and many of the themes in the report should be high on the agenda for businesses.
As Anthony Connolly, Strategic Risk Consultant at Zurich Risk Engineering, explains: “Many of the risks highlighted in the report are truly global, but likely to affect all businesses in some way. These include geo-political tensions, climate catastrophe, wealth and income disparity, and an ever-increasing reliance on technology.”
Cyber attacks, including phishing, ransomware and malware, are likely to become more common. Roughly two-thirds of respondents to the Global Risks Report 2019 also expected identity theft to increase.
As Anthony explains: “There have a been a number of high-profile cyber incidents over the last few years, from the WannaCry attack that badly affected the NHS, to the Cambridge Analytica case. But businesses are not always making the link between the increase in these high-profile cases and their own risk management.”
As cyber risks evolve, it is important that businesses don’t just focus on IT systems; they also need to ensure they are training staff to identify evolving threats.
As Anthony explains: “IT departments are routinely patching and penetration testing, as well as introducing firewalls and taking other measures to prevent attacks. However, human factors remain key to minimising the risk. The recent test hacking of 50 UK universities revealed that the main weaknesses came from human error in opening phishing emails.
“Businesses need to adopt a training and testing regime to ensure employees are doing their utmost to prevent unauthorised access to systems.”
Geopolitical risks, ranging from failures of regional or global governance, to underemployment, also feature prominently in the Global Risks Report 2019. In the UK, political discussion has been dominated by Brexit, which has its own specific implications for UK businesses.
Anthony says: “Brexit is a multi-dimensional risk with political, social, commercial and economic facets. Combine the uncertainty of doing business in a post-Brexit UK economy with rising global indebtedness and supply chain risk, and many business leaders are struggling to develop a clear and robust strategy.
“What will the political and regulatory landscape look like post-Brexit? Exploring alternative supply chains, markets and business development opportunities are all likely to become the new normal way of working.”
Climate change and extreme weather
The Global Risks Report 2019 identifies extreme weather events as the most likely global risk this year, which for the UK could mean severe flood events. As Anthony points out: “There is a lack of available land, which means some businesses are building on areas of higher flood risk. What does this mean with flooding on the rise?”
More broadly, with many businesses shifting to increasingly global supply chains and just-in-time inventories, they could find themselves more vulnerable to an increase in extreme weather events across the globe.
How should businesses respond to global risks?
Anthony says: “A lot of it comes down to long-term financial planning and business resilience testing. Many businesses only have a three-to-five-year planning cycle, which doesn’t always go far enough.
“It’s all about testing assumptions and planning for the unexpected within executive boards. If an outsourced third-party supplier collapses, is there sufficient resilience, reserves, and knowledge to fill the gap?
“In the case of a major cyber attack or data breach, who within the company has the knowledge to recover systems? Do business continuity plans sufficiently involve the IT team? For example, the finance and IT teams might have their own business continuity or disaster recovery plans, but do they match up?”
Business continuity and contingency is important not just operationally, but also financially. Anthony says: “Do you have sufficient reserves to withstand a major supply chain failure or cyber attack? Do you have sufficient cash flow? If not, can you access funding?”
How can Zurich help businesses manage global risks?
The Global Risks Report 2019 makes plain the complex and interconnected challenges facing UK businesses and the wider world. All will need to develop innovative solutions and risk management approaches to thrive in this changing environment.
Anthony concludes: “Insurance can provide the backstop, but it’s not the catch-all solution. Companies need to maintain a healthy, balanced approach to risk.
“Beyond insurance cover, Zurich can provide access to strategic risk management guidance, support on resilience testing and planning, and access to a cohort of specialist risk engineers. We are here to help brokers and customers plan for the challenges ahead.”
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