The Dangers of not Looking Ahead

Risk management has undoubtedly moved up the corporate agenda in recent years with fears of war and terrorism being added to the usual list of business 50 worries.

Shivan Subramaniam, the Chairman and Chief Executive of FM Global, a commercial and industrial property insurer, says, “Corporations are operating in a turbulent world where businesses are seeking growth through globalization, out-sourcing, consolidation, just-in-time delivery and cross-border supply, further increasing their potential exposure to risk.” Add regulatory, legal and labour considerations, and you begin to understand the complex nature of business risk in the 21st century. FM Global believes the majority of all loss can be prevented or minimized and this should be the first part of any disaster recovery plan. It also argues that prevention is better than cure and says there is a lot companies can do to stop such events from becoming a disaster in the first place.

However, research shows that more than one-third of the world’s leading companies are not sufficiently prepared to protect their main revenue sources and have room for improvement. To best protect cash flow, competitive position and profit, companies need to assess the potential hazards that can impact top revenue sources and make sure there is business continuity planning.

A new research report from Marsh, the world’s biggest insurance broker, found that half of European companies did not know how to manage the most significant risks to their business.

Most of Europe’s senior executives surveyed admitted that they did not have procedures in place to manage properly operational and strategic risks, which were responsible for most company failures in the twenty-first century.

The survey found that the three most significant risks, and those that businesses felt least able to manage, were:

• Increased competition

• Adverse changes in customer demand

• Reduced productivity because of staff absenteeism and turnover.

While business leaders are aware that these risks are the most threatening to their future survival and growth they are scratching their heads when it comes to protecting their businesses against them. Management processes could easily help companies identify and address these risks. Instead, too many companies take a low-level approach to risk management preferring to focus on easy-to-solve risks, such as asset protection and health and safety.

1. The companies are paying more attention to risk management nowadays.

2. Businesses face greater risks.

3. Prevention of all loss isn’t better than cure.

4. Businesses can’t evaluate risks which can affect their profits.

5. Many companies take a low-level approach to risk management.