Internal and External Business Risks
What are the top sources of risk facing finance leaders today? In 2018, Dun & Bradstreet commissioned a global risk study of finance leaders to understand their challenges—and we identified top risks that finance leaders are concerned with both internally and externally.
Top 5 Risks Finance Leaders are Facing by Impact
Effective risk management starts with understanding and prioritizing business risks internally. This, in itself, is proving to be an exceptional challenge. Here were the top areas that finance leaders identified as internal risks:
- Monitoring risks within the customer, supplier, or partner base. Effective monitoring means consistently and constantly evaluating threats within a business’s core customer, supplier, and partner network. Due to the growing number and intensity of business risks, it’s not surprising that nearly 40 percent of finance leaders are struggling to identify them and manage them appropriately in real time.
- Forecasting or predicting risk. It’s difficult to create an inventory of current risks, let alone future risks, and finance leaders are also finding it difficult to forecast and predict what will have the most impact on their businesses in the future.
- Growing profitably. Growth is every business’s charter, and in the current global debt crunch and geopolitical environment, it’s not surprising that this also ranked high on finance leaders’ list of business risks.
- Integrating business data across the organization for more efficiency and effectiveness. Data challenges—with linking business data and gaining insight from it—also ranked high on the list of areas that finance leaders are contending with.
- Optimizing cash flow. Using cash strategically also ranked high on the list of risks. Concerns with supplier, customer, and partner viability may have an impact on the flow of cash, which may in turn increase business risk.
Finance Leaders’ Perceptions of External Industry Threats
Not only is risk becoming more difficult for businesses to manage internally, a number of external threats are facing finance leaders today. In the past few years, geopolitical risk, bankruptcies, technological disruption, NAFTA renegotiations, and the pace of innovation all emerged as risks that are beginning to warrant concern.
Dun & Bradstreet’s economists highlighted a deteriorating global business operating environment in their most recent Business Risk Report. Trade risks, political factors, and a growing global debt crunch have added to this challenging business landscape for finance leaders. Many noted that they are concerned with a decline in the viability of their customers and with disruption in their own supply chains.
A heavy concentration of finance leaders were, according to the study, moderately concerned with technological disruption. There is both power and risk associated with this disruption. New technologies and modern tools are available to help manage and identify risk with data, yet failing to adopt or adopting the wrong tools and technologies can have a dramatic impact on a business’s entire infrastructure and performance.
Combatting Complex Global Risk with Effective Risk Management
Generating insights on risks and opportunities puts finance leaders in a position to succeed when it comes to analysing, predicting, monitoring, and most importantly, managing risk. Developing an effective risk management strategy begins with building internal cultures around innovation, exploring opportunities for automation, and becoming inspired by the possibilities of data.
Learn more about how modern finance leaders are managing risk by downloading Dun & Bradstreet’s study, The (R)evolution of Risk Management.