The recession breeds greater operational risks to business

Supply chain risks and the impact of redundancies on business effectiveness have emerged as the two biggest risks to business operations as a result of the recession, according to a new survey.

The poll also showed that two thirds of organisations that responded believe they face greater operational risks than compared with 12 months ago.

Over 70% of those polled, including chief financial officers, finance directors and heads of operational risk, said that the risk of disruption caused by supply chain issues has increased in the past 12 months, with concerns over the stability and resilience of smaller suppliers and partners in the difficult economic climate.

The impact of redundancies and cutbacks on the effectiveness of the day-to-day operations was also cited by more than 50% of delegates as a growing cause of concern.

The poll was taken at a roundtable discussion with the Institute of Chartered Accountants IT Faculty in conjunction with SunGard Availability Services.

“Over 70% of those polled said that the risk of disruption caused by supply chain issues has increased in the past 12 months.

Roland Brook, associate director, Smith & Williamson, one of the respondents, said: ‘There is now a real understanding across many levels of business that firms simply cannot afford any interruptions to critical business operations."

Asim Balouch, group operational risk manager at Investec, said: ‘Organisations are becoming increasingly aware that they cannot operate effectively without having a complete understanding of their data and the way that their IT systems underpins operational efficiency and integrity.’

Keith Tilley, managing director UK and executive vice president Europe for SunGard Availability Services, said: ‘All organisations need to assess the impact that disruption to their supply chain could have on their business and have plans in place to continue normal operations should a supplier run into problems.’

John Oates, IT Advisory Partner with Baker Tilly and Chairman of the ICAEW IT Faculty, added: ‘In the last 12 months we have seen operational risk rise up the business agenda as organisations identify new threats to their business, not least that caused by growing numbers of redundancies.’

Key Findings

65% of those polled believed levels of operational risk have increased within the past year

70% of respondents believed they are at more risk from supply chain issues (e.g. business partners going bust) compared to a year ago

Around half of respondents stated that redundancies and cost reductions have impacted on effectiveness of day-to-day operations and increased operational risk

A third of survey respondents said risk and resilience issues are now discussed at Board level.