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Top 10 Risks for 2012

In early 2011 we discussed the top risks for 2011, leading into 2012.  A little over a year later we thought it prudent to cover what we see are the Top 10 risks for the rest of 2012 and leading into 2013.

1. Global economic uncertainty LY 9. Over the past few years we have experienced ongoing global uncertainty which has created a level of fear in the economy and also made consumers more financially focused.  This in turn creates a level of job uncertainty which can result in emotional and financial pressures on staff.  All of this leads to pressure from a financial perspective for organisations and for individuals.  The key to mitigating this risk is providing certainty for your customers on your products and for your employees.

2. Consumer sentiment shifts LY 1 Consumers continue to act very quickly and ruthlessly shift from liking your product to disliking your product.  Consumer sentiment has seen the death of  many brands, as the consumer switches to alternative products.  The key to mitigating this risk is having an ability to be adaptive and quickly responding to the change in consumer sentiment.

3. Regulatory change LY 4. Another year and again where would a top 10 be without this old but secure favourite.  The global financial crisis has empowered governments all around the world to step into industries with regulations to ensure future viability.  And essentially consumers demand their governments protect the economy in the event of corporate failures.  Therefore, organisations need to manage this risk with the same vigour and attention as they have in the past, as government oversight will only increase in the next few years.

4. Outdated business processes LY 8.  Business processes age, just like technology and people.  If you leave a business process unattended or not reviewed for longer than 12 months then you are destined to see a failure of some kind in that process.  Every business process needs an accountable owner and ongoing monitoring and review of these processes is necessary.  This risk can cause massive reputational and financial damage if left unattended.  Business process reviews through business efficiency teams are mandatory.  Techniques like six sigma and kaizen are just some of the ways of managing this risk.

5. Industry breaking new technologies LY 2. Industry breaking new technologies can and will occur in almost every industry over the next few years.  To mitigate the organisation needs to make active, not reactive, decisions on the future of the industry they are in and how they wish to either participate or not in that future.

6. Data security and privacy LY 5. This risk is emphasised through the consumer focus on speed and efficiency, which does not always lead to simple data security and privacy controls.  Organisations need to consider the full gambit of the consumer experience and the quest to appease the customer, with the need to protect their data and also ensure a secure physical and non-physical environment.  The traditional controls around risk management need to be reconsidered to providing more automated and monitoring controls than ever before.

7. 3rd party arrangements LY 7. Failures of 3rd parties has only made this risk more evident.  It is not just the financial failure you need to concern yourself with, it is also the controls over service levels, their control environment, their ability to deal with internal and external disasters, and the effectiveness and efficiency of their activities.  The key controls over this risk are identical to the controls placed over your own internal processes.

8. External and internal fraud LY 6. With the online world exchanging billions of dollars and increasing daily this risks continues to grow in stature.  Many organisations have been focused on this risk but that does not mean you neglect it.  The fraudsters, both internal and external, are typically one step ahead of where you are.  You need to continue to ensure your fraud controls are in place but invest in technologies that continue to keep you, as best as you can, one pace with these highly organised fraud conglomerates.

9. Environmental Risk new.  The recent events in Australia which have seen bushfires, cyclones and floods highlight the ever vulnerable nature of the human race to mother nature.  All organisations disaster recovery methods and business continuity methods should be focused on managing this risk.

10. Lack of skilled resources   LY 10. There were a number of risks that could have slotted in here, but this one is probably front of mind at the moment due to continual change every organisation experiences.  Therefore, skilled resources, who can work in ever changing environments are critical to a successful organisations.  Single points of failure need to be effectively managed so that workloads are shared and knowledge is a resource that is shared across the organisations.  If you manage your information and knowledge better through collaboration and knowledge sharing tools, then this risk is significantly reduced.

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About

Scott North has extensive experience in enterprise risk management, internal audit, operational risk and compliance, risk strategy, scenario planning, technology risk, technology business analysis, systems design, financial accounting, and management accounting. Scott is a Fellow of the Australian Institute of Chartered Accountants with a Masters Degree from the University of Melbourne in Business and Information Technology. Scott is also a Fellow of the University of Melbourne.

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