Interconnected business risks complicate environment

According to BDO Australia risk advisory partner Michael Hill, “risk doesn’t arrive neatly packaged anymore.”

With global instability, regulatory burdens, cyber threats, and AI now being the biggest challenge for businesses, their interdependence is only compounding the problem.

In its latest Global Risk Landscape report, BDO revealed that almost 85 per cent of business leaders see risks as both increasingly complex and interconnected, with almost 90 per cent taking this consideration into account when assessing threats.

The report signalled that many businesses are struggling to adapt – more than half experienced difficulty distinguishing potential harm from background noise, and 55 per cent claimed short-term operational pressures often take focus over long-term risk planning.

Hill also identified a growing disconnect between risk identification and management – which is also more complex than ever – the majority of surveyed business leaders (80 per cent) believe the risk environment is characterised by crisis more than ever, with 68 per cent agreeing that this environment is fast-tracking corresponding negative impacts.

Because “risk is no longer a series of isolated events that can be managed within individual functions,” management needs a better understanding of what connects risks and adapt their decision-making accordingly, Hill said.

Many organisations, he continued, are yet to move on from disconnected risk management, and only nine per cent exercise a proactive risk management approach, despite the threats only growing.

He explained: “A geopolitical event can become a supply chain issue, a cyber issue, a regulatory issue and ultimately a financial issue. Organisations that continue to assess those risks in isolation will struggle to respond quickly enough.”

As such, businesses that embed risk ownership across leadership, rather than leaving it to a specialist risk function, will be better placed to navigate uncertainty.

“This creates an environment where those best placed to navigate uncertainty will be those that embed risk ownership more broadly across leadership teams and operational functions,” Hill concluded.