Cybersecurity has come to the forefront of risk oversight for board members and C-suite executives, according to results of a survey of business executives by Protiviti and the Enterprise Risk Management (ERM) Initiative at the North Carolina State University Poole College of Management.
More than half of the global 277 survey respondents (53 percent) indicated that insufficient preparation to manage cyber threats is a risk that will “significantly impact” their organizations this year. Following a string of data breaches in the past year, cyber threats jumped to number three this year, up three rank positions in year-over-year survey results, reflecting increased concern about operational and reputational damage associated with potential breaches.
The survey findings suggest that while the business environment in 2015 will be somewhat less risky than in the previous two years, most of the business leaders surveyed indicated that they are more likely to invest in additional risk management resources in 2015.
The survey also identified differing perceptions between boards of directors and members of the executive team regarding the current risk environment; CEOs and boards of directors reported more optimism about risk issues while CFOs and chief audit executives perceived a more risky business environment.
“While regulation continues to be top-of-mind for business leaders worldwide, there are emerging risks that are receiving increased consideration and attention. Based on our ongoing conversations with boards and executive teams, we added five new risk areas for participants to rank in the survey this year. Two of these made it to the top 10 risk list: one focused on organizational culture and its ability to encourage identification and escalation of risk concerns and the other on customer retention in the face of evolving customer preferences,” said Jim DeLoach, a managing director with Protiviti. “The top-10 ranking of these two risks indicates a shift in mindset and priorities for corporate leaders. As a result, we expect there will be increased oversight in these areas at the board level during the next year.”
The top 10 risks for 2015
Following are the top 10 risks identified in the annual risk survey, along with the percentages of respondents who identified each risk as having a “Significant Impact” on their business.
- Regulatory changes and heightened regulatory scrutiny may affect the manner in which our products or services will be produced or delivered (67 percent)
- Economic conditions in markets we currently serve may significantly restrict growth opportunities for our organization (56 percent)
- Our organization may not be sufficiently prepared to manage cyber threats that have the potential to significantly disrupt our core operations and/or damage our brand (53 percent)
- Our organization’s succession challenges and ability to attract and retain top talent may limit our ability to achieve operational targets (56 percent)
- Our organization’s culture may not sufficiently encourage the timely identification and escalation of risk issues that have the potential to significantly affect our core operations and achievement of strategic objectives (51 percent)
- Resistance to change may restrict our organization from making necessary adjustments to the business model and core operations (49 percent)
- Ensuring privacy/identity management and information security/system protection may require significant resources for us (52 percent)
- Our organization may not be sufficiently prepared to manage an unexpected crisis significantly impacting our reputation (46 percent)
- Sustaining customer loyalty and retention may be increasingly difficult due to evolving customer preferences and/or demographic shifts in our existing customer base (48 percent)
- Our existing operations may not be able to meet performance expectations related to quality, time to market, cost and innovation as well as our competitors (46 percent).