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Corporate perception of business risks shift in 2018

Disruptive innovation, digitalisation, organisational resistance to change, cyber threats and corporate culture are some of the top risks that large companies need to address in 2018 – but the overall global business environment is slightly less risky than in previous years, according to a report by North Carolina State University’s ERM Initiative and Protiviti.

The research – based on the Executive Perspectives on Top Risks Survey – found that board members and other corporate executives in all regions perceive a slight reduction in the magnitude and severity of risks on the horizon in 2018, compared to 2017. The respondents said they are likely to devote additional time or resources to risk identification and management over the next 12 months. However, there are noticeable shifts in what constitute the top 10 risks for 2018, compared to last year. For example, the number one perceived business risk in 2017 was economic conditions but this slipped to #8 this year, while the rapid speed of disruptive innovation and new technologies, together with a company's resistance to change, were considered the top two business risks for 2018.

The top 10 risks were:

  1. Rapid speed of disruptive innovations and/or new technologies within the industry may outpace our organization’s ability to compete and/or manage the risk appropriately, without making significant changes to our business model
  2. Resistance to change may restrict our organization from making necessary adjustments to the business model and core operations
  3. Our organization may not be sufficiently prepared to manage cyber threats that have the potential to significantly disrupt core operations and/or damage our brand
  4. Regulatory changes and regulatory scrutiny may heighten, noticeably affecting the manner in which our products or services will be produced or delivered
  5. Our organization’s culture may not sufficiently encourage the timely identification and escalation of risk issues that have the potential to significantly affect our core operations and achievement of strategic objectives
  6. Our organization’s succession challenges and ability to attract and retain top talent may limit our ability to achieve operational targets
  7. Ensuring privacy/identity management and information security/system protection may require significant resources for us
  8. Economic conditions in markets we currently serve may significantly restrict growth opportunities for our organization
  9. Inability to utilize data analytics and “big data” to achieve market intelligence and increase productivity and efficiency may significantly affect our management of core operations and strategic plans
  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, especially new competitors that are “born digital” and with a low cost base for their operations, or established competitors with superior operations

The graphics below provide more detail on how priorities and perceived risks are shifting:

 

The survey gathered responses from 728 board members and executives across a number of industries and from around the globe. The respondents included 89 CFOs.  

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