The risk landscape has become significantly more complex over the last three years and the greatest risk facing businesses now are political and technological, according to the 'Looking Glass report' from global law firm Clyde & Co and Winmark the professional network organisation.
A survey of 89 general counsel (GCs) and 21 of their board member colleagues found that they view the risk landscape as having become significantly more complex in the last three years (78% of GCs and 73% of board members agree), while political risk is considered to be the top threat facing businesses, with technological risk a close second.
Simon Konsta, senior partner at Clyde & Co, comments: "Businesses today are having to adapt to a 21st century risk environment, in which traditional risks such as political and property risks are being compounded by new and fast developing risks such as cyber, climate change and reputation."
"How businesses respond to this environment is one of the most pressing issues facing boards today. As this year's report demonstrates, the GC has a leading role to play in helping the board navigate the challenges and futureproof the business."
John Jeffcock, chief executive of Winmark, says: "In recent years, globalisation, the growth of supply chains, the advent of the age of digitisation and automation and the geopolitical and regulatory ramifications of the global financial crisis have transformed the corporate risk environment."
Lack of preparedness a cause for concern
Less than half (43%) of GCs and board members (35%) believe their organisations are sufficiently prepared for the impact of rising political risk. While there is a significant disconnect between the views of GCs and their boards when it comes to their organisations preparedness for technological risk (37% vs 60% say their organisations are prepared).
Peter Hirst, partner at Clyde & Co, comments: "It should be something of a concern that neither GCs nor the board feel sufficiently prepared for the threat of political risks. Over the last couple of years the political landscape has become increasingly complex, causing new and significant issues to arise which require business to be on the front foot in order to mitigate the risk."
"On the technological front the old adage of the legal department being more risk averse rings true. This should serve as a comfort to the board, knowing their GCs are taking the risk seriously and erring on the side of caution."
Data breaches and cyber-attacks top technology risk
The research also found that GCs and board members consider data breaches and cyber-attacks to be the greatest threat linked to the use of technology.
Four fifths (78%) of GCs and board members (79%) thought that data breaches were the greatest technological threat, with cyber-attacks almost level (75% of GCs and 79% of board members).
Worryingly, more than half of GCs (56%) and board members (64%) feel unprepared to deal with cyber-attacks and 42% of both groups feel unprepared to handle data breaches.
Despite the concern over a lack of preparedness for cyber-attacks 42% of GCs and 33% of board directors admit to not having a crisis plan in place.
Isabel Ost, legal director at Clyde & Co, says: "Organisations must put together crisis management plans and practice their responses for data breaches and cyber-attacks. Both present a severe risk for a company’s operations and reputation. No IT systems are infallible and human error continues to expose organisations so it is essential to be prepared for the worst.”
Responsibility for risk
When it comes to who is responsible for identifying the risk factors facing an organisation, GCs generally see the legal function as having primary responsibility for both, while the board sees a greater role for risk teams.
Peter Hirst concludes: "Whether they agree or not, it is beneficial for the board that GCs see their role as both identifying and reducing risks. It is imperative to ensuring a holistic approach to risk mitigation.”
Brexit expected to have damaging impact
Although Brexit is not expected to impact financial performance in the current year, nearly half (48%) of GCs expect the long-term impact to be negative. Investment in technology is also expected to be negatively affected. Board directors also have a somewhat gloomy outlook, with 30% expecting long-term financial performance to suffer.
Read the full report here.