by Gillian Lees, Senior Director, Governance & Risk Research — Management Accounting, Association of International Certified Professional Accountants
The World Economic Forum (WEF) has just published its annual Global Risks Report highlighting a record number of threats. It does not paint a pretty picture. With many finance and accounting professionals playing a critical role in developing and implementing risk management processes and procedures for their organisations, we take a snapshot view of the big risks and issues you should have on your radar for 2018.
Environmental risks continue to feature most heavily – for example, extreme weather events and natural disasters. However, technological risks are becoming areas of particular concern with cyberattacks and data fraud or theft at third and fourth, respectively, in the list of most likely risks.
A decade on from the global financial crisis, it is notable that economic-related risks no longer feature strongly in the 2018 Global Risks Report. Does this mean that the economic challenges have been tackled successfully? The report is not confident that they have, and questions whether there is some complacency about the global economy.
If there is one message that comes through loud and clear, it is that all organisations need to understand risks in a connected and systemic way. The report maps the interconnections between the top risks. It is also no surprise that greater speed and complexity in the business environment are stretching the ‘absorptive capacities’ of organisations to deal with challenges and stresses. The need to build and support collaborative mechanisms to deal with this complexity is crucial.
Evidence of such risks can be found in the CGMA (Chartered Global Management Accountant) report Joining the Dots, where 70% of respondents admitted there was moderate or significant room for improving collaboration between leaders and employees to support better decision-making.
Manage existing concerns
Risks highlighted in previous reports, such as youth unemployment and online misinformation, remain in view. The report explores how these risks and global responses have evolved. For any risk manager and organisation, ongoing monitoring and reviewing of existing concerns remain important. It is not all about hunting down new risk, but extracting any learnings and key developments from existing concerns to inform future business decisions.
The WEF report also focused on a series of ten possible scenarios – or ‘future shocks’ intended to provide food for thought. They cover issues such as reduced internet efficiency in delivering services to customers, the impact of artificial intelligence (AI), and the growth of regulatory restrictions.
All ten scenarios may affect your organisation. However, as every business is unique the best advice is to develop scenarios and models of your own.
In summary, the evolving risk landscape calls for greater collaboration, learning from the past and consideration of possible future scenarios. The Association of International Certified Professional Accountants , the united voice of the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA), has tools and resources to help finance professionals guide their organisations in this new era of risk. They include the CGMA risk tool kit, our new cybersecurity risk reporting framework and global insights on the state of risk within organizations.