The BDO Global Risk Report: Remaining relevant in an age of disruption

Fewer than one in five business leaders across the Asia-Pacific believe their organisation is sufficiently future-proofed, according to BDO's 2018 Global Risk Report.

A diverse range of disruptive forces, from shifting customer behaviour and new regulations to the speed of technological change, are all weighing heavily on the minds of those surveyed. Nearly two-thirds (62 per cent) of overall respondents cited regulatory risk as their top issue, followed closely by macroeconomic developments (60 per cent), and environmental risks (56 per cent).

In Asia-Pacific specifically, macroeconomic developments made up the most concerning risk (80 per cent), followed by computer crime (70 per cent), and regulatory risks (68 per cent).

Increase agility to combat risks

The way to combat such disruptive forces? Embrace change.

The survey results indicate there is a growing appetite for change to ensure organisations have the right strategies, infrastructure, assets, facilities and resources, staff capabilities, organisation structure and culture to optimise performance.

At the same time, the willingness of boards to tolerate incidents has reduced dramatically.

Global risks affecting Asia-Pacific

Many risks affecting businesses in the Asia-Pacific region are coming from outside. For example, the USA’s introduction of tariffs in 2018 on raw materials including steel and aluminium has a direct impact on exporters into that market, while the lack of clarity concerning the Trans-Pacific Partnership is adding further uncertainty.

The ability to deal with change is a key component here. 92 per cent of C-suite executives in Asia say greater agility would help their business respond to changing market conditions more successfully.

While other countries’ trade and foreign policy may be out of a board’s control, their business’ ability to adapt isn’t - and this will be an important means of dealing with increased global risk.

Getting to grips with cyber

Meanwhile cyber risks are now being given the prominence they deserve on the boardroom agenda.

This is not least because the cost of a cyberattack is so great. In Australia in 2017, the average cost of a data breach was $2.51 million.

It is therefore not surprising that governments around the world are beginning to increase scrutiny of cyber incidents, with the EU’s General Data Protection Regulation and the Australian Notifiable Data Breaches Scheme both key pieces of legislation to come into effect in 2018.

Increased regulation

It’s not just cybersecurity that’s seeing more regulation, however.

Major reforms to reduce working hours and increase wages are taking place in Asia, while changes to company taxation and scrutiny over financial institutions is on the agenda in Australia.

Asia-Pacific businesses will need to take a proactive approach to managing regulation to ensure continued compliance.

In the area of environmental risk, at least, Australian organisations are already showing a growing appetite for complying with international standards, for example the American Society for Testing and Materials’ (ASTM’s) global environmental standards.

Embrace change or fail

Increased risk and volatility means business leaders will need to become more agile decision-makers, and better prepared to adapt their strategy and operations as the external environment changes.

In practice, being agile requires improved insight and foresight of the risks on the agenda, and a tighter approach to enterprise risk management to respond to these insights.

While many of these risks started some years ago, it used to be just leading edge companies that would embrace disruption. Now, there is a growing recognition among boards that, in order to remain relevant, they simply have to participate in change.