2018 predictions: Risk blind spots could undermine companies’ growth prospects

Written by Dave Brosnan, CEO, CNA Hardy

2017-11-30

The combination of the shock UK election result, concerns over the progress of Brexit and a wave of terror attacks means business leaders will be looking to beef up growth in Europe and Asia in 2018. According to the results of our risk and confidence survey undertaken in autumn 2017, 63% identify Europe as the market with the strongest growth potential; looking ahead to Spring 2018, interest in Asia almost doubles from 8% to 13%.

But as companies go more global their risk exposure rises, and three fundamental boardroom risks – corporate, regulatory and supply chain – are being overlooked, potentially threatening future growth plans.

Only 8% of the C-suite leaders we asked were worried about corporate risk (fraud, corruption, poor governance, pensions exposure) or regulatory risk – both domestic and international. Yet both are significant risk blind spots for UK firms with international growth ambitions.

The regulatory climate is set to get tougher in 2018 as the UK comes into line with Europe. This will increase the risk of individual directors being held criminally responsible for broader systemic corporate failures. Good corporate governance will be a regulatory push in the both the UK and EU, and charges of negligence or corporate manslaughter will become more commonplace where decision making has resulted in poor customer, supplier or employee outcomes.

Perhaps more worrying was the figure of just 6% of business leaders ranking supply chain as an area of concern. Longer and more complex supply chains increase exposure to a web of third parties in Europe and Asia make operations more complex and, drive up risk.

Looking ahead, almost half (48%) of respondents predicted that cyber risk will become their biggest business concern in 2018 with businesses worried the threat of malicious attacks and data theft will increase. System failure and disruption from tech-enabled competitors and start-ups is also a concern going forward, for 39% of businesses leaders. These companies recognise the risk of failing to keep up technologically and being disrupted by more able, efficient or adaptable businesses ready to take advantage of changing market conditions.

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