Top 5 Risks In 2016

Thomas Frenehard

Since we are still at the beginning of the new year, I’d like to summarize the top hurdles that companies had to navigate through in 2016. Each risk category below represents a dangerous iceberg that many companies, unlike the Titanic, have fortunately been able to avoid thanks to good preparation and processes.

There have already been many studies and reports on this topic, and I realize that each of the risks mentioned below would deserve a blog of its own. But my intent is not to be exhaustive—or scare readers—but simply to share my thoughts on the top risks that companies faced in 2016, and that they most likely will continue to face in 2017.

1. Regulatory pressure

Regulatory change is still top of mind for many executives across the board. I hope I’m not disappointing anyone when I say it doesn’t seem that the regulatory pressure will diminish anytime soon. New and updated compliance guidelines will continue to be published in 2017, and new regulatory bodies will likely continue to be created that will also contribute to this regulatory inflation.

2. Uncertain economic conditions

The outcome of the recent election in the U.S., the upcoming electoral period in major European countries, and the unknowns resulting from Brexit will create uncertainty. But let’s not forget that the effects of the Arab Spring are also still ongoing. Like most of us, markets don’t like uncertainty as it has a direct impact on short- to medium-term investments.

3. Cyberthreats

Cyberthreats are a concern for most companies, especially with the emergence of the Internet of Things, which could create more entry-point vulnerabilities than even before. Allow me to quote Rod Beckstrom, former CEO and president of ICANN and director of National Cyber Security Center, as I think it summarizes well the state of mind of many CIOs:

The connectivity of all things:

Law 1: Everything that is connected to the Internet can be hacked

Law 2: Everything is being connected to the Internet

Law 3: Everything else follows from the first two laws

4. Loss of key talent

To my mind, a human resource is the most important asset in an organization. Even if the company is fully automated, what would happen if nobody innovates? In a tense labour market, finding and retaining key talent has become a crucial competitive strategy.

Most people think of the impacts associated with loss of productivity, decreased engagement from other colleagues, and the direct hiring cost that results from a talent leaving the organization. But few realize that there is a cost for onboarding and training new colleagues, and that newcomers will make errors and will need to adapt to in-house culture. If these impacts aren’t accurately identified, planned, and shared, then newcomers have little chance of success.

5. Disruptive innovation

What business can safely say today that its market can’t be disrupted by a new player? Airbnb was created in 2008 and soon became a major competitor for hotels. Same goes for Netflix and other video-on-demand services that change the way we rent movies. But to my thinking, the more striking examples are in the automotive and aerospace sectors.

Who would have thought that these two industries (typically very difficult to enter because they require a great amount of technical expertise and heavy assets and investments) could have been shaken up in such a short timeframe by Tesla and SpaceX? The sky is no longer even the limit, it seems.

What about you? What were the top risks that your company was monitoring closely in 2016?

I look forward to reading your thoughts and comments on this blog or on Twitter: @TFrenehard.

 


Thomas Frenehard

About Thomas Frenehard

Thomas Frénéhard is a director in the Governance, Risk, and Compliance Solution Management team at SAP. His particular responsibility is with SAP Risk Management. Thomas's other functional areas of focus are in internal control and compliance management and audit management. In this role and in constant interactions with SAP’s network of partners, clients, and internal stakeholders, Thomas is responsible for bringing together technology, skills, and products to deliver an always-compelling solution for enterprise risk management.