The world is moving towards endemic in dealing with COVID-19 and almost back to pre-COVID activities with some exceptional country and location, but the question is are we really living in the same environment and operate in the same way? During the last 30 months, we witness the business disruption and unpredictability have been the watchwords mostly to COVID-19’s prolonged presence — businesses look ahead to normalcy. In particular, businesses are reviewing the risks they face. In an era where new threats come heavy and rapid, here are the top 9 global business risks that we forecast in the coming months to keep executives on their toes.
1: Risk of rapid changes to government policies and regulations due to pandemic
The recent COVID-19 catastrophe may be one of the most unprecedented and influential events for investors, firms, business owners, and other market participants. Along with the worldwide outbreak of this disease, it has also spilled over government policies and regulations, adversely affecting every major capital market’s stability.
This crisis is of a different nature. Thus, immediate responses to adapting should be handled and planned for changes in government policies due to the pandemic. Whether it be economically or the state of the employees, reinforcing them through the dissemination of decisions and information to all employees is crucial, especially when it comes to any changes in management, working hours or conditions, payroll, company policies, and others.
Moving towards post-COVID, are businesses ready to adapt and swiftly address to non-COVID related new policy changes?
2: Risk of Cyber-attack
As businesses continue down the digital path, which we believe is a path of no U-turn, cybercriminals have begun showing their fangs! Unprecedented events such as the pandemic have led to a new normal where digitalization of work process, e-payment and remote working is now the standard rather than the exception. Meanwhile, over these few years, an explosion in the number and severity of cyberattacks has risen up to 30% since many employees are working from home.
Companies are becoming more vulnerable to cybercrimes due to increasing reliance on computers, programs, networks, social media, and global data. However, with the rise of investments in cybersecurity tools, organizations and their employees are no longer defenceless. Implementing an IT security team in every company is the first step to conveying information or setting compliance checkmarks, sensitizing employees, and training them into becoming a strong “human firewall.”
With cyber risk is here to stay, organization should plan in advance for their cyber response plan and include this scenario as part of their BCMS to ensure their employees can be “cybersafe”.
3: Risk of climate change
The negative impacts due to climate change are mounting much faster than anyone could predict less than a decade ago. Many consequences are practically unavoidable and, recently, have been hitting all vulnerable populations. The change in climate is poised to create a wide array of economic, business, and social risks such as destruction of crops, deterioration of health, loss of lives, damage to property, and many more.
In recent years, significant floods have had hit hard several countries, where not only lives were lost, but businesses were disrupted, and many had to mourn the loss of their homes and belongings. For executives managing factories and manufacturing plants in the flood-prone areas, this will be another concern to protect and reduce the damages.
Organization must place immediate strategies to adapt to climate change and extreme weather by providing stronger protection for the natural environment.
4: Risk of boarder disputation and political instability
Boarder disputation and political uncertainty continues to weigh on several locations in Asia and globally. With the Russian invasion of Ukraine kick started the war which this generation did not experience since after the 2nd world war. Although several smaller scale of war did happened in the last few years but the world never seen with such wide differences and instability since after the 2nd world war and cold war. Tension between the Superpower and top economic countries certainly will be the major door stopper for globalization and businesses.
Significant differences in internal political view and changes in ruling parties was also observed in several Asia countries.
The worldwide tension and instability of some country’s political system will definitely significantly affect the globalization for business and local market’s appeal which going forward organization will need to plan for this risk as well as it impacts which most organizations that simply forgotten since after the WW2 and cold war ended.
5: Risk of supply chain disruption
The rise of COVID-19 undoubtedly sent shockwaves through the global supply chain, which spent much of 2020 till 2022 playing catch up. Since the economic downturn during the early pandemic crisis, many sectors faced demand drops and surges by segment due to unexpected events such as floods and earthquakes.
Suppose companies learned anything from the last two years. In that case, it’s how unexpected fast events can cause significant issues to cascade through interconnected supply chains, creating more enormous challenges along the way, such as supply shortages, inventory placement, and reduced productivity.
6: Risk of resources shortage
Resource risk exists in every business. Resources are the backbone of any business activity and the organization spend a significant amount of time ensuring they have to achieve their goals. When the global resources shortage happens, the produce countries might have to stop for export. In example, Indonesia had stopped to export of coal and palm oil which affected the Asia countries, India had stopped to export of flour shortly after the Russian and Ukraine war outbreak, as well as Malaysia had stopped to export of chicken due to the local market shortage.
Resources shortage especially food and water will be a continuous area that organization needs to build up their resilience in the coming years. Mitigating resource risk is all about being prepared in advance. Organization can carefully plan the best course of action in the event that risks are realized. Without this preparation, you can exacerbate risks by making ill thought-out decisions.
The best ways to mitigate resource risks are including identify likely resource shortages, optimize resources, look for alternative sources from various suppliers, assess the impact of the business operation, source cost-effective resources, carry out capacity planning, and active succession planning.
7: Risk of high cost, driving up inflation, fear of recession and financial crises
Global inflationary pressures have drastically risen, underpinned by surging energy, supply disruptions, commodity prices, increase in demand, and war. The Ukraine war had driven up the oil prices, resulting in increased logistics and supply chain costs. The Fed increases interest rates that again, drive up the mortgage rates and lending rates. To compensate, companies will see more and more staff asking for pay raise above the rate of inflation, thus leading to higher costs for businesses, which could increase prices further, adding more to inflation.
Most economists are expecting inflation to increase this year due to commodity prices and wages, which will evidently reduce the purchasing power of money, affect global businesses’ overseas trading, and lower levels of consumer spending – reflecting poorly on sales across all businesses and industries. Despite moving into the endemic phase, COVID-19 is far from over as new variants, such as Omicron, continuously interrupt the global market. Standard will change, costs will continue to rise, and competition will grow more challenging regardless of industries.
Inflation and recession financial crisis which will come first and hit us hardest will be everyone’s guess but to address these threats and building the business resilience to deal with it, are some things that we need to deal with immediately.
8: Risk of non-compliance and step up in regulation
After two turbulent years marked by disruption and uncertainty, the pressure to proactively manage risk and non-compliance issues is more crucial than ever. The pandemic was such a massive shock for most companies where the last two years were all about company survival, but now; legal, regulatory, and social systems are catching up with new policies, conditions, and technological advancement.
Non-compliance with financial management has resulted in issues of irregular payments amounting. With that, staying compliant with the ever-evolving regulations and adhering to the laws and standards are of major concern for business owners to avoid penalties and fines, delays in access to markets and products. With serious case might even cost the organization loss of reputational and even their licences to operate!
9: Risk of staff shortage due to absenteeism or turnover
The greatest challenge of workforce shortage continues to damper business productivity and recovery, which could inevitably lead to a high turnover rate as employers try to minimize operation losses. When it comes to staff shortage, there are more jobs than people out of work, and global staff shortages, along with supply chain disruptions, have been an ongoing issue for businesses everywhere due to the pandemic.
Beyond reduced productivity, these shortages may be caused by workers and job hunters who are seeking a living wage to survive in the current economy. With that, it could lead to more severe effects such as burnout, stress, low morale, deteriorating health conditions, poor retention, and even unplanned absences—making this a critical risk area for business leaders to address head-on.
With the pandemic impact also change many of the employees view of full-time employment and preference of flexible working hours and work from home, this is especially so for the millennials which will become one of the major work forces since 2018.
Disruption can involve all businesses regardless of industry. This pandemic COVID-19 has taught many organizations to always have a plan to reduce significant losses and be prepared for any uncertain circumstances.
Through identifying of risks and the scale that it could impact to businesses; we can reduce the probability and impact these risks could pose. The mitigation measures we can establish by building the organization resilience with the BCMS process, the communication process as well as providing as a guide for Executives decision making aligning to company’s strategic goals.
A well integration of the BCM and rigorous Enterprise Risk Management (ERM) System implementation will certainly build up the organisation Resilience.
Last but most importantly, as we all know changes is THE ONLY constant and BEING RESILIENCE is the way to survive! BCP Asia assists organizations in establishing their Enterprise Risk Management (ERM) and Business Continuity Management Systems (BCMS) through a systematic and fit-for-purpose implementation process that is aligned to ISO31000 and ISO22301 respectively. We customized our solutions, uniquely for each of our clients, achieving knowledge transfer and improving their (our clients) resiliency. To know more about us and our service, visit www.bcpasia.com
Written by: BCP Asia Consulting Team