Why the changing landscape of risk management calls for greater diligence amongst businesses
IN a fast-changing, yet unpredictable marketplace, firms of all sizes must take the precautions necessary to ensure the continued success of their business by taking part in meticulous risk management practices.
Today's fiercely digital landscape has seen the emergence of triggers to business disruption which may not have been on the radar a decade ago. As a result, business continuity planning is more critical than ever. Strategy must recognise potential risks that may threaten the continuity of the business and be stringent enough to function in the event of a disaster.
It's no secret that increased digitalisation is a key trend currently transforming various industries. Businesses are increasingly reliant on cloud-based services, but the use of these services presents obvious vulnerabilities which businesses must be aware of.
Data breaches and cyber-attacks such as this can have a catastrophic effect on business operations. Ultimately, greater dependence on technology means greater risk, and therefore greater diligence in risk mitigation is required.
Alongside this, new data protection regulations call for businesses to incorporate new data-handling procedures. The biggest regulatory change in recent years related to data security was the General Data Protection Regulation (GDPR) which came into effect in May.
The failure of a business to comply with such regulations can have a major impact on business operations. For example, fines for not being compliant with GDPR can be up to 4 per cent of a company's annual revenue.
New regulations which are implemented by the government to reinforce data security are inherently risky as the modification of data-processing procedures adds cost and complexity to business models.
Despite these threats gaining momentum over recent years, some organisations continue to operate without a considered approach. These is particularly common amongst small businesses which take the incorrect and concerning view that risk management is only required for large organisations.
Business leaders and decision-makers within businesses of all sizes need to encourage a strategic transformation from one based on risk reaction to a strategy centred around risk prevention and anticipation.
When risk management is deeply embedded and understood by employees at every level of the decision-making process, a business is ultimately better equipped to meet the challenges of an environment which is continually evolving.
With various insurance cover options available, such as business interruption insurance and directors and officer's liability insurance, organisations should consult a professional to determine which policies should form part of its risk management strategy.
Seeking professional guidance enables a business to identify any potential risks and enables a bespoke plan to be put in place so that they are protected on all fronts. It is important not to take a ‘one size fits all' approach as this should be completely bespoke given the varying needs and requirements of each business.
At Willis Insurance and Risk Management, our teams have extensive experience in assisting and arranging insurance policies for a wide range of industries and also in developing robust risk management strategies.
:: Richard Willis is managing director of Willis Insurance and Risk Management