Has led to the widespread foray of new technologies but has it also brought on more risks?
Over the past 18 months, the landscape for business has become extremely challenging due to socio-economic disruptions.
Businesses have had to deal with simultaneous economic and health problems, which have resulted in new employee and customer interaction norms, unprecedented levels of remote working, supply chain re-engineering, and a slew of bankruptcies, consolidations, and creative alliances. However, COVID isn’t entirely responsible for the slew of changes in the international risk environment. Other variables, such as digitization and artificial intelligence, continue to shrink our world, and the tight labour market has only served to exacerbate the situation.
Now that 2020 is behind us, it presents an opportunity to analyze these new and emerging risk trends that may be important for global companies over the next 10 years. Based on insights from zurichna, let’s take a look at what the challenges that lie ahead are.
Increased disruption everywhere
Industries today are facing disruption on all fronts. Business leaders must keep a careful eye on three key risk drivers: Political, technical, and sociological.
On the political front, businesses must be aware of the various stimulus packages’ trajectories and how they may be biassed toward specific industries or business types, as well as financing availability. Small and medium-sized businesses, who were particularly heavily struck by the epidemic, may find the recovery process to be cruel as well. Between January and April, 43 percent of micro, small, and medium companies (MSMEs) in the United States shut shop, with many others facing permanent closure. These trends were replicated in other countries across the world as well.
Consequently, in order to establish more self-sufficient and self-sustaining economies, several countries are increasingly turning to protectionism. With technological adoption, businesses were required to change overnight as consumer demand patterns changed. Consumers, workers, and investors today also require that businesses represent their values more than ever before.
New risks brought on by digitalization and online marketplace acceleration
According to the World Economic Forum’s Worldwide Risks Report 2021, digitalization was a game-changer for certain firms, who saw their online presence increase and, as a result, their global presence as well. According to the research, global e-commerce grew by more than 20% by 2020.
COVID accelerated the shift by many years, even though the tendency was already on the rise. According to the Adobe Digital Economy Index, worldwide e-commerce sales will hit $4.2 trillion by the end of the year, equal to a top five countries in terms of GDP, ahead of Germany. En-masse, the comfort level with purchasing things online has risen dramatically, and it is expected that new cyber security issues shall emerge as a result. The failure of cyber security measures is a major concern as many hackers took advantage of the COVID-19 problem to access networks, and the number of cyber-attacks increased from the second half of 2019 compared to the first half of 2020. The increased e-commerce penetration also presents a ripe hunting ground for hackers.
[box type=”info” align=”” class=”” width=”“]The biggest challenge for cybersecurity today is the increased surface area of threats apart from endpoint security concerns. However, software vendors, device manufacturers, and other key stakeholders in the cybersecurity ecosystem seem to be working together to ameliorate upon cybersecurity concerns.[/box]
While digitization has leveled the playing field, it has also led to digital Darwinism where organizations that have failed to make an impact have eventually perished. For many businesses, digital Darwinism is cause for much consternation.
Increased supply chain complexity
COVID-19 revealed the global supply chain’s vulnerabilities like no previous catastrophe before it. In fact, according to a recent study done by EY, just 2% of respondents felt adequately prepared for the pandemic. Companies were forced to confront new challenges like national lockdowns, mandatory factory closings, travel disruptions and even a global container shortage, all of which created significant obstacles to running their businesses. As a result, companies have learned lessons that will serve them well in the coming decade.
Companies are learning that, while just-in-time inventories are cost-effective, they can cause huge issues if they are cut off from their suppliers during a crisis. Having a single-source supply chain today is considered highly precarious. Businesses recognise the need to diversify their supply chains and are using more comprehensive methods to achieve redundancy. [box type=”note” align=”” class=”” width=””]According to a recent McKinsey report, every 3.7 years, any firm can expect a shutdown lasting at least a month. Further, having numerous alternatives, even if they are costly, may be less expensive than suddenly being without any.[/box]
Businesses must become more proactive about possible hazards with their direct suppliers, as well as their suppliers’ suppliers and farther down the supply chain, in order to effectively manage everything from raw materials to completed goods.
It is also critical for businesses to keep an eye on potentially high-impact events in the immediate term as well as the longer-term landscape in order to create and sustain resilience. After that, be ready to reply quickly, creatively, and cooperatively; Businesses and the global community can then handle the risks and opportunities ahead in a sustainable manner, increase their resilience to future shocks, and achieve long-term development.