Risk refers to the uncertainty of an outcome that could become negative (and sometimes positive). The fact remains that all companies face risks concerning different areas such as their health and safety, environment, finances, and operational strategies. In general, the world’s business landscape is changing due to globalization and digitization. While some of these changes are useful, they also pose some risks. For example, technological innovations often revolutionize businesses in one way or another. But at the same time, they may cause serious challenges to some categories of enterprises. Here are the top 12 global business risks entrepreneurs should watch out for in 2021 and beyond.
- Business interruption (including supply chain disruptions)
Disruptions, including those brought forth by the ongoing COVID-19 global pandemic, are almost inevitable when running a business. And according to an annual report by the 10th Allianz Barometer Survey, they are ranked high as the number-1 risk for business organizations in 2020 and 2021.
The primary sources of interruptions that businesses often face include natural disasters, fire outbreaks, and supply failure. For over four consecutive years, business interruptions have been topping the list of the most common global business risks, with a whopping 38% of responses ranking this factor as one of the critical challenges confronting companies.
In the current business ecosystem, corporate institutions have become more complex due to increased interconnectivity. Among the list of the top 12 global business risks in 2016, cybersecurity issues and political risks have been known to have dire consequences on the growth of brands.
- Cybersecurity events
Statistics show that cyber-attacks cost the world’s business economy roughly 445 billion US Dollars per year, with the globe’s leading economies taking the lion’s share of these events. Cybersecurity threats soared to astronomical heights amid the COVID-19 lockdown, and these are expected to grow further in the coming years.
As stated by the Symantec Corporation, the challenges of using iOS devices coupled with the fast-emerging Internet of Things (IoT) revolution are vital factors that will drive the spate of cyber-crime. In most cases, cybersecurity risks are identified by consumers, not the business itself. This fact even makes it even more worrying for brands to face cybersecurity risks as they typically threaten the targeted company’s reputation.
- Natural catastrophes
The Risk Barometer has stated that the impact of natural disasters constitutes a severe business threat. In 2015, insurance claims resulting from natural disasters fell to 27 billion dollars – and that was one of the lowest levels ever seen since 2009. However, in recent years, global trends have seen urbanization and coastal floodplain development raise business risks due to rampant windstorms and floods. Furthermore, socioeconomic changes coupled with advanced technologies and rising global supply chains have posed threats to some businesses’ continuity.
- Legislative and regulatory changes
Significant changes in legislation and regulation are a significant concern for businesses all over the world. Big decisions can impact the costs of transacting trades and also alter competition in industries. Risk analysts have pointed out tightening regulatory pressure reverberates across numerous spheres of enterprises.
Strict federal scrutiny and heightened class action activities in benign sectors have given rise to a highly volatile financial landscape for global businesses. Throughout the world, data protection laws are becoming stricter with each passing season. These have evolved into a risky situation leading to companies paying severely for minor regulatory violations.
- Big Data and digital effectiveness
Undoubtedly, technology has proven to be a vital business tool. The question is – who can boast using tech 100% well? One major issue that companies face is managing their data and getting better value from it effectively. Big data has made waves in the corporate world lately, and it forms the core strategy of data-driven organizations. Depending on how you see it, big data can either be a risk or an opportunity. Companies now sit on mountains of data, but with no technical resources to analyze it, big data can become a curse rather than a blessing.
- Future of workforce
The future often comes with uncertainties for business enterprises, including startups. Digital innovation and technological advancement can enhance productivity, safety, and management in different sectors, including mining. However, some brands are grappling with understanding what their workforces may look like in the not too distant future. A common question companies ponder over is how to enhance existing skills to be able to get the most out of these advancements.
Workforces may struggle to penetrate sectors like mining, considering the highly competitive market for digital data and related skills. It helps to ask and provide answers to questions such as the following. What creative measures can you use to train your workforce for today and the future? Is there a way to equip future leaders with the essential skills they need to thrive in the digital age? Should your brand look at benchmarking to cultivate best practices?
- Carbon emissions and energy consumption
The effects of climate change and global warming keep exerting pressure on companies to cut down their carbon emissions and use energy judiciously. A low-carbon economy is the ultimate dream economy to safeguard the future of the planet. The transition to clean energy seems to be in the right direction, and the momentum surrounding this topic is insane. Top tech companies, for example, are beginning to embrace the calls to lower their carbon emissions. A low-carbon global economy can materialize in the near future, thanks to the massive pressure in favor of this transition.
Renewable energy has a significant role to play in the efforts to reverse the runaway climate change impact. The adoption of clean energy is going to create new opportunities for entrepreneurs across the energy industry. That said, oil and other carbon-related industries view this transition as a significant risk. Nevertheless, electric vehicles powered by renewable energy are likely to hit the road sooner than later.
- Loss of brand image
When not adequately addressed, unexpected circumstances like health and safety risks, operational crises, product recalls, financial struggles, and widespread irregularities can cause irreparable damage to a firm’s image. Business interruptions, misuse of data, and ethical violations can harm the reputation of a brand. Unfortunately, these can affect product sales, share prices, and a company’s ability to hire the best talents to push the brand forward.
Aggravated assault is another serious charge that can tarnish an entrepreneur’s status and endanger employees’ quality of life. This crime can impact your ability to secure employment and even land you in prison. It’s an excellent decision to foster peaceful co-existence in your company and partner with criminal defense attorneys for legal consultations.
- Market developments
Profit-based organizations are greatly concerned about the consequences of volatility, stiff competition, and the nightmares of market stagnation. The reality is that long-term strategic decisions involve managing challenges to business plans via digitization, automation, and interconnectivity. Emerging startups and agile technologies cause disruptions in businesses. Meanwhile, many companies already struggle to manage a tall list of bottlenecks such as compliance with regulatory and legislative environments.
- Political risks
Peace is not usually valued until war comes in. Political events like terrorism, civil wars, and trade wars raise deep concerns for business owners. For example, when China locked horns with the Trump-led U.S. administration in an unceasing trade war, Chinese risk managers rated business interruption as their most significant risk. The uncertainties of tariff announcements also made it very difficult for businesses to plan well for the future.
Numerous countries across different continents experience political turmoil at a point in time, which hamper companies, assets, and customers’ growth. Studies have shown that 54% of multinational corporations fear the consequences of political incidents on their supply chains. The impact of terrorism and the introduction of trade sanctions are risky to organizations’ success in such regions.
- Macroeconomic developments
So far, the most significant contraction in global trade since the economic crisis, plus emerging markets hitting a downward spiral, have also ranked high on the worldwide business risk scale. Macroeconomic developments are part of that effect. The decline in essential commodities like oil, gas, steel, and iron ore has disturbed the supply chain more than necessary. One example of a sector that has been negatively affected by these developments includes construction.
- Theft, fraud, and corruption
Economic uncertainties such as recessions fuel the spate of theft, heinous crimes, fraud, and other unprintable situations. Fraudulent incidents make the list of the top 12 global business risks for the third consecutive year. Many companies are not sure how to mitigate risks of this nature because most of these incidents are not detected or reported.
Businesses are increasingly worried about the fall-out from fraudulent and corrupt incidents. Law enforcement authorities and regulators have been trying to clamp down bribery and corruption, and market misconduct. But, these incidents have plagued the business economy for generations. Anyway, penalties are being increased for culprits, and law enforcement activities are increasing, which means theft, fraud, and corruption may go down in the coming years.