Emerging threats and risks are precursors to business crises, so all organizations should have an updated risk management plan to implement when these risks become a reality. Business leaders should be aware of the following operational risks:
- Cybersecurity Risks
Cyberattacks are becoming a real threat in the digital world. A report from SonicWall, an internet cybersecurity firm, shows a 105% surge in ransomware attacks. Significant payouts to hackers and cybercriminals include the $5 million paid by Colonial Pipeline and the $11 million ransom paid by JBS Foods, which encourage continued cyberattacks.
The supply chain is the No. 1 target for cybercriminals. This results in a significant loss of revenue for businesses during downtime and recovery. According to the U.S. Chamber of Commerce, the average downtime after a ransomware attack is 21 days. Some businesses take up to 287 days to clear the ransomware, conduct forensic analysis, back up data and get back online.
- New Energy With New Hazards
The cost of oil and gas was already on the rise, even before the invasion of Ukraine by Russia. Driven by the climate crisis, as well, governments will continue investing in alternative energy options, including liquefied natural gas, hydrogen and hydroelectricity.
However, after decades of depending on hydrocarbon-based energy options, these changes are monumental and bring forth uncertainty about hazards. As businesses adopt new energy sources, they should be prepared to construct infrastructure, train employees to handle new substances and be ready to manage emerging hazards.
- Climate Change
Even though extreme weather was thought to affect a few places, specifically areas vulnerable to natural disasters such as hurricanes, earthquakes and tornados, irreversible climate change is increasingly becoming a concern to businesses. According to AON insurance, more than $238 billion was spent on natural disasters in 2021, with insurance covering only $108 billion.
Most businesses are poised to face significant operational risks due to extreme weather and natural disasters caused by climate change. Unfortunately, all businesses are affected by tough weather conditions. For instance, flooding makes it impossible to access different locations. Floods also damage property, electricity and hinder business operations. Businesses can only resume once professionals repair water damage.
See also: How Insurtech Alters Operational Risk
- Functional Safety
There has been increased focus and criticism on functional safety, specifically surrounding environmental health and safety design and management. Interestingly, this interest doesn’t stem from organic growth but instead pressure from insurance providers to have high-hazard businesses enforce functional safety measures.
Due to this, businesses new to the functional safety realm are wondering how to maneuver these compliance requirements. Fortunately, with the help of advancing technology, they can improve visibility, streamline governance and automate environmental, health and safety (EHS) management using EHS software.
- Economic and Political Instability
Economic and political instability is another common operational risk businesses face in 2022. Economic volatility resulting from the pandemic and political activities can affect various business dynamics. Increased political polarization, the migrant crisis and more issues will likely lengthen the harsh business environment.
However, while these issues may seem out of control, businesses can do a lot to mitigate the risks of economic and political instability. For instance, developing risk profiles that evaluate risks for immediate responses and building a robust business that can withstand economic shocks can help businesses withstand unstable situations.
Supply chain risks, data privacy, the changing regulatory environment and compliance issues are other major operational risks that businesses should watch out for. However, businesses facing risks from all sides should maximize efficiency and create a focused approach to risk management.