Businesses Fail To Manage Risk Despite Preparing For ‘Major Crisis’

Corporates aren’t prepared to tackle the headwinds of market risks, according to two separate reports released last week.

FTI Consulting released its inaugural Resilience Barometer report during the World Economic Forum held in Davos, Switzerland last week. The report explores how companies in G20 nations are preparing for risks related to technological disruption, regulation and cybersecurity.

Overall, organizations did not score well, according to Kevin Hewitt, FTI Consulting’s chairman of the EMEA region.

“This report looks to identify and unpick the challenges, and opportunities, that companies are facing today as they manage risk and enhance their corporate value,” he said in a statement announcing the report. “More must be done to ensure sufficient infrastructure and processes are in place to proactively manage business threats in 2019.”

Adding weight to FTI Consulting‘s findings is the separate report published from DuPont Sustainable Solutions (DSS) last week. Its global survey, the 2018 global operations risk management survey, warned that corporate understanding of risks is not enough. If the enterprise fails to act to address and mitigate those risks, there may be “catastrophic implications on business operations.”

“Old ways of looking at risk are insufficient in today’s global business environment if executives want their organizations to be sustainable and prosper,” said DSS global managing director Davide Vassallo in another statement. “Running a successful business is more complex today than ever before, with executives facing numerous challenges on a daily basis both within and outside their organizations.

“With these challenges come numerous associated risks that executives must successfully anticipate and mitigate,” Vassallo continued. “In order to transform an organization, executives should integrate risk into organizations’ business strategy to engage employees, increase productivity and drive competitive advantage.”

Below, PYMNTS breaks down some of the strongest data points from these reports that illustrate where corporates are failing to adequately understand and mitigate risks they face today.

40 points out of 100: the resilience score of G20 companies, as calculated by FTI Consulting. The company called this “a major cause for concern in an environment that is growing more and more challenging.”

30 percent of firms surveyed by FTI have been a victim of a cyberattack that led to stolen or compromised assets, making cybersecurity the largest threat to corporate resilience in 2019. Less than half of executives say they are taking proactive measures to address this threat, despite 28 percent of firms predicting they’ll be hit with a cyberattack at some point this year. One-third of companies acknowledge their data security practices are sub-par.

87 percent of companies said they expect a “major crisis” this year, FTI’s report found. Even so, only about 40 percent of businesses said they are confident in their firms’ ability to actually manage such a scenario.

Two-thirds of executives say they feel safe when they see data showing low incident rates, which is a false sense of security for corporates, according to DSS’ report. Seventy-eight percent of firms acknowledge that low incident rates do not necessarily mean reduced risk, yet companies are apparently feeling secure nonetheless.

44 percent of executives admit to having gaps in their current risk management systems, DSS found. That’s despite the fact that executives agree it is critical that risk management systems are integrated with each other and are regularly reviewed and managed.

One-quarter of executives say front-line personnel are not aligned with their firms’ biggest risks, the DSS survey revealed. Most added that they do not feel senior-level executives are entirely aligned with their corporations’ top risks – a significant increase from last year’s survey, DSS said.