ICAEW’s director for Wales, Robert Lloyd Griffiths is urging Welsh firms to review their approach to risk management and prepare for further challenges ahead.
His call follows a recent report published last month by fellow professional membership body, the Chartered Institute of Internal Auditors (IIA) which found businesses are facing a perfect storm of risks with the war in Ukraine, the cost-of-living crisis, looming recession and the climate emergency throwing many into a permanent state of crisis.
The Risk in Focus 2023 research report identifies the top risks facing organisations for the year ahead based on a poll of 834 chief audit executives (CAEs).Cybersecurity tops the annual business risk survey for the fifth year running, with 82% of CAEs citing it a top five risk, reflecting the rapidly weaponised cyber attack landscape.
Half cite human capital, diversity, and talent management a top five risk making it the second biggest risk faced by organisations, up two positions from 4th place last year – reflecting the severe recruitment and retention challenges facing many companies. Meanwhile, geopolitical and macroeconomic uncertainty is the risk that has risen highest up the agenda, up four positions from 7th to 3rd place in the risk rankings, marking a 44% year-on-year increase. And yet, despite the severity of this risk 92% of respondents say they are not spending major time or effort auditing the impacts of this risk on their business.
As the war in Ukraine intensifies, it is accompanied by higher global energy prices, soaring inflation, and increased tensions between the West and China, so the gap between awareness and action taken to mitigate this rising risk is alarming.
Other key findings in the report include:
- Changes in laws and regulations were cited as a top five risk by 44% of respondents, slightly down from 46% a year ago.
- Digital disruption, new technology and AI was cited by 38%, down from 45% and moving it from the 3rd to 5th biggest risk, as other issues take precedence.
- Climate change continues to rise in the rankings for the fifth year in a row. Perhaps prompted by the, record-breaking temperatures recorded across Europe this summer, 37% now cite climate change as a top five risk, compared to 31% last year.
Robert Lloyd Griffiths, Director of ICAEW in Wales says that the survey results reinforce why Welsh businesses should be focussing on risk management and resilience as a priority: “ Small businesses are the backbone of our economy here in Wales and they are facing multiple risks as the cost of doing business soars and the political uncertainty continues. It is therefore critical that businesses of all sizes review their approach to risk management and prepare for the potential challenges ahead because, now more than ever, there is a need for good governance and prudence.
“Although change is a feature of doing business, managing it successfully can be complex. During times of economic uncertainty, businesses will often focus on the short term and how to survive the current storm, but boards must also consider what might be around the corner.
“While we don’t know what 2023 is going to bring, ICAEW Chartered Accountants will be guiding their clients and taking these decisions in businesses the length and breadth of Wales over the coming weeks and months. Our members have the skills to help model the impact of any changes so businesses can plan ahead, as well as advise on new approaches and investments.
“The Risk in Focus report sets out a series of recommendations for how boards should work with their audit and finance functions to tackle these risks. There is also help and guidance available via our own Corporate Governance Community. We urge businesses of all sizes across Wales to take heed of this advice.”
Membership of ICAEW’s Corporate Governance Community is free and open to everyone, including non-ICAEW members.