Risk management is a crucial part of any business's strategic planning, and failing to account for potential problems could lead to heavy financial and reputational damage.
A comprehensive approach to risk management isn't just about avoiding losses. Research from PricewaterhouseCoopers last year showed that effective risk strategies can optimise performance and facilitate growth.
Less than half of businesses felt prepared to combat increased competition last year.
Nevertheless, while 73 per cent of executives said risks to their business are rising, only 12 per cent displayed qualities that PwC considered indicative of risk management leadership.
"Developing an effective strategy requires investment, but the payoff and competitive advantage can be enormous," said Dean Simone, leader of PwC's US Risk Assurance practice.
Experienced accountants in Geelong can help your business identify the major risks to your organisation and work with you to develop a sophisticated strategy.
But what risks pose the biggest problems for businesses? Let's examine some of the key challenges that currently concern senior executives.
Damage to reputation or brand
Aon's 2015 Global Risk Management Survey revealed that this risk concerned organisations the most last year, making it the first time since 2007 that it ranked first.
However, Australian firms may be particularly worried about brand image, as this problem topped the rankings of a similar Aon survey for the three financial years between 2010-11 and 2012-13.
Australia was among the best-performing developed nations following the global financial crisis (GFC), but slow economic growth remains a key issue for many countries globally.
Organisations can help protect against economic volatility by closely monitoring market conditions, maintaining cashflow and controlling costs.
Regulatory and legislative changes
Complying with increasingly stringent regulations and legislation remains a growing challenge for many industries, particularly financial services in the wake of the GFC. In fact, this risk ranked first among Australasian business leaders in 2014.
However, Aon's report showed that some organisations have begun to see increased regulation as less of a burden and more of an opportunity to move ahead of competitors that have poorer risk management processes.
Less than half (49 per cent) of businesses felt prepared to combat increased competition last year, according to Aon. The risk ranked fourth then, but is predicted to hit the top of the list within just three years.
Enterprises hoping to fend off competitors must identify and understand the latest consumer trends, adopt new technologies and tackle globalisation pressures to remain successful in today's challenging commercial environment.
Would you like to know more about how WMC Accounting can help you develop a risk management strategy? Please click here.