In the dynamic landscape of modern business, is essential to navigate numerous risks to ensure long-term success and stability. Companies face diverse challenges that can jeopardise their operations, financial health, and reputation. A 2024 Global Risks study done by by the World Economic Forum (WEF) highlights a bleak outlook in the short term; 54% of respondents anticipate some instability and a “moderate risk” of global catastrophes.
Operational disruptions, financial fluctuations, reputational damage, and geopolitical tensions further complicate the risk landscape. Moreover, hiring the wrong individual can lead to severe consequences, making thorough background checks essential. Is your business ready with a risk-management framework to manage these risks?
1. Extreme weather
Climate-change related vulnerabilities are number one on WEF’s list of risks for 2024. After the hottest summer on record in the Northern Hemisphere in 2023, 66% of those surveyed saw extreme weather as the biggest risk for 2024 and could get worse: Expected global economic losses by 2060 could be US$24.7 trillion due to weather-related losses.
2. Security and cyber incident risks
In today’s digital landscape, security and cyber incidents pose significant risks that businesses must vigilantly address. As companies increasingly rely on technology to operate and store sensitive information, they become prime targets for cybercriminals. Security breaches can result in unauthorised access to confidential data, financial losses, and damage to a company’s reputation. Cyber incidents, such as ransomware attacks, phishing schemes, and data leaks, not only disrupt operations but can also lead to severe regulatory fines and legal repercussions.
3. Compliance risk
How familiar are you with the laws and regulations that apply to your business? Compliance can be tricky for many reasons. Compliance risks represent a critical challenge for businesses operating in today’s highly regulated environment. Failure to adhere to industry regulations, data protection laws, and corporate governance standards can have significant legal and financial consequences. Non-compliance may lead to hefty fines, legal battles, and damage to a company’s credibility.
Recently, the Ministry of Manpower (MOM) in Singapore introduced the Complementary Assessment Framework (COMPASS), which requires employers to offer clear career development pathways for foreign employees. This underscores the importance of businesses understanding and navigating these evolving regulations. To mitigate compliance risks related to COMPASS, it is crucial to implement robust employment verification strategies, including thorough background screening and employment history checks, ensuring adherence to current and new regulatory requirements.
4. Financial or economic risk
Financial or economic risk is closely related to business profits, so investors and shareholders often scrutinise it. Financial risks are caused by multiple factors, such as market movements, foreign currency exchange rates, commodity price fluctuations, etc. Strategies to mitigate financial or economic risk usually aim to ease cash flow issues, and common tactics include getting insurance, diversifying income streams, and limiting the amount or tenure of loans.
5. Reputational risks
Reputational risk involves the potential damage to a company’s public image and brand value, which can arise from various incidents, including unethical breaches, product failures, or poor customer service. Social media exacerbates this risk by amplifying the impact of any negative event. For instance, in 2017, United Airlines faced a severe reputational crisis when a video of a passenger being forcibly removed from an overbooked flight went viral. This incident led to widespread media condemnation and public outrage, significantly damaging the airline’s reputation. In such a highly connected environment, even a single misstep can quickly escalate, underscoring the importance of proactive reputation management.
6. Geopolitical risks
Geopolitical risks can significantly impact supply chains, as political instability, trade disputes, and international sanctions disrupt the flow of goods and materials across borders. The ongoing conflict between Russia and Ukraine serves as a stark example of such disruptions. The war has severely affected global supply chains, particularly in sectors reliant on key exports like grain and energy. For instance, companies worldwide have faced shortages and price increases for agricultural products due to the blockade of Ukrainian ports and the destruction of infrastructure. Additionally, disruptions in energy supplies from Russia have led to increased costs and supply uncertainties for industries dependent on natural gas and oil.
7. Hiring risk
When hiring, one of the most critical risks businesses face is the potential for hiring the wrong person, which can lead to significant consequences. A notable example of this risk is the case of a Nanyang Technological University (NTU) dropout who forged a bachelor’s degree in engineering and deceived companies, securing positions in The Walt Disney Company, Marshall Cavendish, and Scholastic Education International. It is shocking easily to get a fake university degree, a recent investigation by a Singapore news media reported.
Organisations can protect themselves from potential financial losses, reputational damage, and operational disruptions by ensuring candidates’ authenticity and qualifications.
How to minimise business risk
To effectively manage risks and ensure long-term stability, organisations must work towards getting the basics of risk management strategies right. Some essential actions include:
- Establish a comprehensive risk management framework that integrates risk identification, assessment, and mitigation processes across all levels of the organisation.
- Monitor and review your risk management strategies to adapt to evolving risks and ensure your controls remain effective.
- Cultivate a risk-aware culture by promoting clear communication, ongoing training, and accountability among all employees.
- Conduct background checks on potential employees.
Understandably, most businesses don’t have the time, know-how, and manpower to dedicate to thorough intelligence gathering. There’s also the grey area of privacy laws to consider – how much is a company allowed to dig into their potential hires or partners? In such cases, trusting a specialist and market leader like RMI to do the legwork for you can be the most cost-effective solution. Contact us to learn more about our solutions.
