Global Interconnectivity Drives Complexity: Top 5 Risks Concerning Canadian Businesses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Interconnectivity Drives Complexity: Top 5 Risks Concerning Canadian Businesses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In a world that is ever-changing, businesses are facing new risks that are hitting their confidence hard and their reputations even harder. CNA’s May 2019 Global Risk and Confidence Survey results identified that an increasingly complex, tech-led, interconnected global economy has created a clear East-West divide in business confidence, a decline in investment in business fundamentals as well as heightened concerns around reputation risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America in May 2019 is at a pinch point of rising risk perception and declining confidence. The mood is very much a cautious “wait and see.” According to the Survey, business confidence of North American businesses fell 8%, leaving the region at 59% confidence, in just the past six months. Although confidence levels have dropped, we remain optimistic about the future as our region remains the second most confident globally — behind Asia-Pacific.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What’s concerning Canadian business executives today? Here are five risks and key learnings to note:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.     Cyber Risk: Cyber threat is omni-present, as businesses’ ongoing reliance on technology solutions is ever more complex. In fact, 66% of businesses with 250 to 499 employees have experienced a cyberattack in the last 12 monthsⁱ  and this threat is growing as businesses invest in new technology and cyber criminals use increasingly sophisticated techniques. It takes organizations 279 days, on average, to identify and contain a breach, with an average data breach total cost of $3.9Mⁱⁱ.  This is a major business interruption, and proves to be one of the top concerns for businesses.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Learning: A proactive approach to cyber threats will protect a company’s reputation, bottom line and future success. Breach Response Plans should contain specific consideration for both breaches of defences and also how to respond to a ransomware attack.  Have the board of directors deliberate on the response plan.

 

 

 

 

 

 

 

 

2.     Technology Risk: New business models, made possible by the advent of the 4th Industrial Revolution, have changed how value is created, shifting the risk paradigm. The insurance industry has two problems to grapple with:

          • The rise of intangible risk in the form of brand and reputation;

          • Interconnected technology risk – a problem with a product or service from a global technology company would have widespread implications for other industries that make up the global economy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Learning: Ever-increasing digital technologies require that companies mitigate the damage with comprehensive risk management protocols and insurance-led protection.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.     Economic Risk: Despite global challenges, the economic outlook in the US is healthy. Key economic indicators, including gross domestic product, are expected to remain between 2% to 3%. Additionally, unemployment is forecast to continue steady and inflation is under control. There is also a slight uptick in corporate development — namely mergers and acquisitions.

 

In Canada, the economic omens are weaker. Economic growth under-shot analysts’ expectations slightly at the end of 2018, with domestic demand for goods and services in decline. Against this backdrop, Canadian business leaders’ expectations for the year ahead are somewhat cooler than their US’ peers and there is a sense that businesses will need to look to external markets for growth.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Learning: As the economy steadies and competition intensifies, companies see greater long-term security and larger growth potential in a significant game-changing deal — rather than focusing exclusively on slow and steady organic growth.

 

4.     Supply Chain: Supply chain risk is at an historic high. However, in our research, supply chain risk has never been a prominent feature in the regional or global risk landscape. A push-back on globalization coupled with a rise in protectionism may be a driving force.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Learning: Managing growing supply chain complexity is always an issue, particularly for smaller and mid-size businesses. Although large firms have more at stake, smaller and mid-sized firms are more vulnerable to impact if they move too fast or too aggressively and underestimate shifting global politics and policy. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.    Reputation Risk: The inevitable consequence of executives’ struggles to manage intangible risks, such as intellectual property or cyber, in this new world economy often leads to reputational damage. The potential for small problems to trigger unexpected cascading failures surrounds us. Indeed, managing reputation risk is an area that divides US and Canadian executives.

 

Whereas in the US the biggest concern by some margin is securing board buy-in for a particular course of action, in Canada by contrast, concerns focus more strongly on the difficulty of managing the adverse impacts of negative publicity.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Learning: New ways to manage reputation risk will be a mainstream discussion as boardroom risk is re-evaluated. In the same way the market has found a way to model the cost of non-physical damage business interruption claims as part of terror and political violence cover, we believe there is scope to model and mitigate the cost of managing reputation risk and the consequential damage to brand value caused by specific triggers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk is becoming ever more global, more interconnected and more complex.  A more connected world requires a more connected response. Looking ahead, there are several areas businesses should focus on to help them achieve a more holistic view of their business, challenges and risk management. For example,  today’s companies require a broader, more diverse range of individuals who can help them appreciate the reputation/brand risk, supply chain, technology, cyber and human risks. Organizations need to consider culture and embedding a more proactive attitude to loss and risk control. Lastly, stronger leadership teams operating within a more proactive risk culture will be better positioned to make the investments in people, processes, technology and markets, thus, enabling long-term growth.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I encourage you to take a read of our May 2019 Global Risk and Confidence Survey, taking a close look at how Canada compares to other global regions.
 

 

 

 

 

 

 

 

 

 

 

 

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