Innovation, partnership and R&D risk, are all included
In a recent interview with StrategicRISK, Joe Restoule, president of RIMS and risk manager for Nova Chemicals Corp. outlined his top ten global risks.
The Madoff scandal was just one crisis that contributed to investors getting the jitters about the security of their assets, said Restoule. “The market is uncertain,” he said. “It is a difficult time to invest with long term confidence.” Currency fluctuation is the other big investor risk which he highlighted. "Who would have predicted that two of the world’s leading currencies, British Sterling and the US Dollar, would face such difficult times," he said.
The subprime crisis revealed that companies have become over reliant on technology to predict market risk. This is unfortunate, commented Restoule.
As more and more transactions are handled electronically new threats are introduced to the security of customer information, he said. “Most jurisdictions have privacy laws, which means companies have to protect customer data. And customer good will is at an all time low, particularly in the financial services industry.”
“Innovation is sometimes stymied in recessionary times,” noted RIMS’ president. “People don’t want to throw out an old business model and develop a new one.”
“Executive liability is greater than ever, we are in an age where you have more accountability than ever before. There is even government intervention in executive compensation,” noted Restoule.
He added: “Business continuity remains a major operational risk, we’ve found with some of the financial institutions that even though they had enterprise risk management (ERM) programmes there business continuity planning failed them.”
“As credit returns to us, the pursuit of M&A activity will be a bigger risk than we think.
Brand and reputation risk
Reputational risk is even more important today, said Restoule. “The reason it's gaining prominence is because of social media. Social media is growing faster and developing along unpredictable channels. We never had Twittering or blogs before. If something goes wrong today its out there quicker and faster so you have to be prepared to deal with the swiftness of how widespread a piece of bad news can become.”
Research and Development (R&D)
“In difficult economic times it is difficult to justify R&D spending,” he said.
Supply chain risk
Increasingly companies are focused on counterparty risk and finding the weaknesses in their supply chains, added Restoule.
Partnership risk is the potential for a partnership, joint venture or strategic alliance to produce an unfruitful effort, commented Restoule.
“We’ve seen over the last few years that the mergers and acquisitions of some big companies have failed because the differences in culture, which means they have failed to achieve the synergies that they thought they could.”
The reason for this, said Restoule, is because bringing together entities requires a large degree of trust. “I don’t think that can always occur naturally, there are misgivings between partners and cultural clashes.”
“As credit returns to us, the pursuit of M&A activity will be a bigger risk than we think.”
Restoule also highlighted the threat posed by nanotechnology, pandemics, climate change, water shortages and carbon disclosure requirements. “Emerging economies in the future will be reluctant to accept the trade off between economic growth and the costs of containing emerging risks.”