What are the most dangerous ‘hidden’ risks faced by today’s businesses?

Most businesses have cover and contingency plans in place for events such as fires and the impact of crime. Cyber-crime in particular has grown from a minor worry affecting only certain types of businesses to a genuine threat to businesses of all shapes and sizes.

There remain a number of so-called ‘hidden risks’ however. These are the risks that have a low likelihood of occurring but a high impact when they do. ‘Black swan’ events are even rarer, as these are one-off events that are impossible to predict beforehand.

Both types of event can be devastating to an unprepared business and could lead to the necessity for corporate recovery services or, in the worst cases, an insolvency practitioner.

The StrategicRISK Europe Benchmark Survey has revealed the top hidden risks facing European businesses in 2016.

Damage to the brand or company reputation, a failure to innovate and the failure of key IT systems are all risks with a low likelihood of occurrence but a high financial impact, should they take place. Terrorist attacks, supply chain risk and contractual risk are other forms of risk that are often not considered or planned for.

Cyber-crime is now viewed as a serious risk in most quarters but non-malicious loss of business-critical or customer data should also be considered. The possibility of mergers and acquisitions (M&A), fraud and corruption within the company and the risk of exposure to currency fluctuations when dealing with overseas customers or suppliers are other examples given of hidden risk.

Black swan events are considered to be so unpredictable that they cannot be measured or modelled. This could be the emergence of a new technology or disruptive business model (the growth of the internet or the use of innovative mobile apps in a new business like taxi service Uber) or it could be an unpredictable environmental, financial or even political event.

The nature of black swan events means they are difficult to plan for but companies can still have contingency plans in place for high impact events that require management and resilience.

By Phil Smith

If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1144.

View all Business Insights