Almost half of UK business leaders predict cyber will be their top concern by Spring 2018, according to a report into risk and confidence among UK businesses
Political risk and cyber threats were prominent among the minds of UK business leaders considering their growth prospects amid a challenging environment, according to a report of the second CNA Hardy Risk and Confidence survey.
Only 28% of business leaders told the London market insurer they felt confident in growth prospects, but, regardless of such fears, over 50% said they were pressing ahead with hiring and tech investments.
Confidence has dropped in 2017: some 71% of business leaders were confident they could grow and prosper in Spring; by Autumn of this year only 28% still felt the same way.
As UK firms look internationally for growth, political and cyber risks dominate, CNA Hardy noted.
Supply chain and corporate and regulatory risk were less prominent – described as potential “blind spots”.
Some 63% of UK business leaders cited Europe as their preferred growth market.
Looking ahead to Spring 2018, interest in Asian markets increased from 8% to 13%.
Political risk was picked by 26% of respondents as their top concern – more than any other risk type.
Larger firms, with turnover of more than £1bn, expressed the greatest concern about political risk, with 29% citing such threats, compared with only 23% of smaller businesses with turnover below the £5-25m range.
As businesses look ahead to Spring ’18 over half (53%) said they believed political risk will remain at current levels, and 54% estimated economic risk levels will stay constant.
Cyber risk was predicted by48% of respondents to be their top concern by Spring 2018, expecting the threat of malware, viruses, hacks or data theft will increase.
Another 39% identified technology risk, such as failure of systems and processes to keep them competitive, as their top concern by Spring next year.
Tech firms were the most concerned by cyber risk, with 62% suggesting this risk will increase by next year, compared to 48% of C-suite respondents drawn from other sectors.
“It’s easy to see how political and economic risk dominate the headlines, but they are not potential business killers like boardroom or supply chain risk,” said Dave Brosnan, chief executive of CNA Hardy.
Six months ago, some 55% of business leaders predicted boardroom risks (combining corporate, supply chain and compliance risks) would be their major concern by the Autumn, but this time only 22% of UK businesses gave it a top ranking.
“If companies don’t do their homework, directors are at immediate and significant personal risk,” Brosnan said.
The only sector where business leaders held fast to their belief that boardroom risk would be their top concern was in technology.
“With less than 10% of business leaders ranking supply chain as an area of concern, and only 8% worried about corporate and regulatory risk, it’s perturbing that these fundamental boardroom risks have dropped down the risk radar,” continued Brosnan.
“These are significant risk blind-spots for UK firms with international growth ambitions.”
The report described a weak prioritisation of corporate risk across all sectors.
Corporate risks (fraud, corruption, poor governance and pension exposure) were low on the risk radar for business leaders across all sectors, but particularly manufacturing (0%), financial services (2%), and construction firms (2%).
Technology firms again topped the ranking with 30% ranking corporate risk as a concern.
“Tech businesses seem more savvy regarding boardroom risk and stand head and shoulders above all other sectors in their understanding of the significant damage that failure to manage corporate risk can do to a company brand,” said Brosnan.
Only three sectors – fintech, manufacturing and professional services – had 10% or more business leaders rating compliance as the risk that most concerns them.
CNA Hardy expressed surprise that regulatory risk was not higher up the radar for the healthcare and life science sectors.
Supply chain risks have increased because of political concerns in the UK about a so-called “hard Brexit”, potentially disrupting market access between the UK and the EU, according to the report.
Cyber risks are also just as threatening to the supply chain as to companies’ own operations, CNA Hardy highlighted.
“In a hard Brexit scenario, there will undoubtedly be tremendous disruption at ports. But we are equally concerned about the threat to supply chains posed by cyber attacks,” said Patrick Gage, chief underwriting officer at CNA Hardy.
“Our experience with companies suffering from supply chain disruption following the cyber attacks this summer suggests this could be as big a risk as Brexit. Many businesses don’t seem to have a ‘Plan B’ in terms of supply chain,” Gage added.
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