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IRM makes its risk predictions for 2016
Written by staff reporter
Cybersecurity, bribery, oil price and financial market fluctuations are among the chief risks facing businesses, according to a UK study carried out by risk management association, the IRM. Further areas of risk concern identified were the effects of continued austerity measures in the UK and the impact of technology enabled disruptive business models.
When asked to assess the level of risk that will be at play across 2016, the outlook of those experts surveyed was relatively pessimistic, and many of the flashpoints chime with the risks identified in the Global Risks Report released earlier this month by the World Economic Forum.
“The impact of current macro trends and risks, such as cybersecurity, a new geopolitical landscape and an endemic low global growth environment will continue to put pressure on, and potentially change, entire business sectors,” says IRM chairman Jose Morago. “Leaders who think critically about the future, anticipate disruption to their sectors, while building resilience and agility in their models, will be in a better position to tackle a challenging risk environment in 2016 and thrive.”
A major risk issue for businesses throughout 2015, cyber risk will persist throughout 2016. “Dynamic and rising threats, emerging data protection regulations and rising stakeholder expectations regarding the level of oversight applied to suppliers and partners, all contribute to the pressure to get cybersecurity right and the anger when things go wrong,” says fellow of the IRM, John Ludlow.
In order to address the organisational threat posed by cyber risk, cyber security needs to become a cross-business and intra-business competency, according to Ludlow. “This is not something that an IT team in one company can fix on its own. All functions across a business need to support a comprehensive policy, and trading partners need to align and work together.”
Oil and related political instability
Uncertainty in the oil price was identified as a key issue that will affect investments and operations.
Mark Boult, IRM Fellow and Director at DNV GL, says that even with the forecast increasing demand for oil, it is expected that supply will continue to be ahead of demand in the short term. “Forecasts generally appear to expect a higher price than today at the end of 2016, however, with no expectation of a return to the pre-mid-2014 levels over the next few years."
Boult sees the lower oil price continuing to put upwards pressure on political and disruption risks in oil producing countries which, if not successfully managed, may subsequently impact on the world as a whole.
The risk of a major accident in the oil and gas sector will remain a major focus in the industry across 2016. Boult says. “The increase in severe weather events occurring in parts of the world, along with the challenge of maintaining the integrity of older assets in financially constrained times, are pressures that we need to focus on to manage this risk down.”
Additional concerns included the continuing austerity drive by the UK government and the likely associated risk factors in the healthcare and charity sectors; changed business models resulting from a rise in fintech companies entering the insurance market with an internet or cloud-based offering; and bribery and corruption risks.
“Enterprise risk management cuts across every sector in every country around the globe,” explains Ian Livsey, chief executive of the IRM. “Effective risk management underpins the core of governments, businesses and society.
“China recently logged its worst economic performance since the global financial crisis began; there are heightened geopolitical risks in North Korea, Brexit implications, migrant crises and the impact of the increase in interest rates in currencies, commodities and oil prices globally.
“There are great opportunities for our members to influence stable economies – risk is more relevant than ever.”