That’s the theme of a blog by risk experts Aon, which we thought was worth sharing here.
It looks at the threats posed by these risks and – conversely – the opportunities they can also present for firms.
The top 10 global risks have been compiled as part of Aon’s 2017 Global Risk Management Survey, which analyses the biggest challenges corporates face and provides insights into how you can prepare for them.
Here we list out the top 10, and explore in more detail the most important ones for Compliance professionals.
The top 10 are:
1. Damage to reputation/brand
2. Economic slowdown/recovery
3. Increasing competition
4. Regulatory/legislative changes
5. Cyber crime
6. Failure to innovate
7. Failure to attract or retain top talent
8. Business interruption
9. Political risk/uncertainties
10. Third party liability (inc E&O)
Which risks should Compliance teams focus on?
Clearly all these issues are a potential problem for firms.
But from your perspective, some deserve particular focus.
Damage to reputation/brand
The risks here are pretty obvious: a corporate brand can be irreparably damaged by events like public scandals, poor customer relations or product recalls.
Share prices may drop; customers dry up. Some companies will not survive.
We look in more detail here at the role Compliance plays in maintaining your brand – because the two are intrinsically linked. As a new report recently showed, good governance is more important to your corporate brand than ever before.
Of course, there are also opportunities to learn and grow from any reputational hiccup. The way you deal with it can boost perceptions of your firm. And using it as an opportunity to review your processes and approaches can build a stronger, more compliant business for the future.
This is certainly a risk for UK financial services, where new competitors – so-called challenger banks – are driving choice and innovation.
Technology is enabling new competitors across a wide range of industry verticals – and disruptors are more active in banking than many other sectors. Much of this digital disruption is driven by customer demand.
Banks and other financial services firms need to respond to this competitive environment to reduce the threat it poses and harness the opportunities it presents.
Often, this competition can be the impetus for innovation. We have seen this already with the FCA’s Regulatory Sandbox, which has seen household names like Lloyds and HSBC join alongside the start-ups.
The established banks are clearly alive to the need to develop new approaches – which is good news as another key risk is....
Failure to innovate
Recognised as the 6th highest risk in the Aon report, a failure to develop new approaches is a huge potential issue for businesses.
This has appeared in the top 10 in the last three surveys, and is predicted to rise to be number 4 in the list three years from now.
Embracing innovation is key to remaining relevant. The FCA has shown its support for new approaches, with its Project Innovate initiative encouraging banks to adopt new structures, delivery methods or products.
For the banking sector, though, innovation comes with more challenges than in many other industries. It’s essential that any innovation is approached in a compliant way (and you can read tips on how to do this here).
The number 4 risk in the Aon list will be a familiar challenge for all Compliance teams. The increasing pace of regulatory change – and the increased requirements this change invariably brings – make it harder than ever to keep on top of your responsibilities.
Keep on the front foot by familiarising yourself with the FCA Business Plan. Understanding the regulator’s priorities and focus areas is one way to stay on top of imminent regulatory changes.
Third-party liability (inc E&O)
Another one which may keep you and your colleagues awake at night. The nature of global supply chains and processes means that firms are increasingly reliant on outside parties to deliver elements of their operations.
The regulator’s latest guidance explains its stance – basically that the regulated firm has responsibility for ensuring the compliant approach of its suppliers. Financial services firms need to be alive to the requirements to make sure you’re not breaking the rules.
The blog and the full report are well worth a read if you want to learn more about the nature of corporate risk in today’s world.
And of course, the changing nature of risk is just one of the challenges keeping you and your team on your toes. To read more about how the Compliance role is changing – and what you can do to adapt and respond – download a copy of our whitepaper, The changing role of the Compliance Officer. You can read a free copy here.