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DEC 2017

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20 ISE Magazine | www.iise.org/ISEmagazine N management Key business risks for 2018 By Paul Engle North Carolina State University and a large consulting company publish an annual survey focused on the business community's perception of risk. Need- less to say, the perceived level of risk is higher than previous years. Business leaders typically react to such conditions by canceling or post- poning planned investments, including hiring personnel and purchasing capital equipment. Unfortunately, in a high- ly competitive business environment threatened by disruption, identifying and managing key risks may be a better strategy. Future economic conditions represent the highest rated risk for 2018, a topic that heads the list nearly every year. Brexit, turmoil in the energy markets and an un- stable international situation gen- erate additional uncertainty. While it may seem like common sense to wait and see about new invest- ments in uncertain times, traditional industries often fail by ignoring innova- tion. Since innovation carries high lev- els of investment and risk, pity the poor CEO who must choose between cau- tion and investing. Regulatory changes and scrutiny, No. 2 on the list, also concern company lead- ers. The manner in which organizations procure raw materials, process them into finished products and distribute them to their customers is highly regulated in most economies. Leading companies proactively identify and address envi- ronmental regulatory concerns through ongoing monitoring and reporting. Service organizations are not exempt. Healthcare may be one of today's most regulated industries. Regulatory re- quirements represent significant costs, as many general practitioners who leave their practices cite regulatory burdens. Not surprisingly, cybersecurity threats represent the third most-feared risk item. The recent breach at Equifax may result in billions of dollars in liability. Nearly one-half of all Americans' personal fi- nancial information was affected, po- tentially creating a significant threat to banking and credit operations in the U.S. While the level of investment to ad- dress this fast-moving risk has ballooned in recent years, the hackers appear to be moving faster. At No. 4, the rapid speed of disruptive innovations and technologies has joined the top five risks. Amazon, Uber, Net- flix, Apple and others have revolution- ized their industries. Disruptors have dis- placed offshore competition as the most feared threats for traditional companies. Innovation continues to be the most effective strategy. Many industries, in- cluding automotive and telecommu- nications, are aggressively seeking to obsolete their own products to counter disruptive threats. This requires enor- mous investments and acceptance of risk. The alternative? Do nothing and be challenged by an upstart. Ensuring the privacy of employees, customers and other stakeholders rounds out the top five business risks. Closely related to cybersecurity, privacy con- cerns affect most companies that ac- quire, store, process and report personal information. Cloud computing and mobile communications add additional complexity. Given an environment fraught with high levels of perceived risk, most senior leaders incorporate some level of risk management. Rather than waiting for bad things to hap- pen, these companies perform an- nual risk assessments and develop effective controls and initiatives to mitigate the risks they've identified. Their boards set up special committees to monitor management's approach. Many companies develop an annual plan to measure, report and address risks associated with their industry. Can an organization effectively man- age industry-driven risk? An effective risk management program appears to represent the most effective approach. Paul E gle is a ma ageme t co sulta t with a BA i a ce. He has more tha 0 years of experie ce i a ageme t, operatio s, product developme t, sales a d marketi g, strategic pl i g d busi ess process improveme t. You may co tact him at paulfe gle@outlook.com. Pity the poor CEO who must choose between caution and investing.

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