Risky business: What are the two biggest threats to the boardroom?

If you’re looking to join a board, or have recently been appointed a director of one, risk management is something you will become familiar with. But if you’re new to the position, you might not be aware of the issues you could be dealing with. So, here are the two biggest risks your boardroom could potentially face in the future:

Cyber Risk

Technology has opened up the business world to a large amount of opportunities. But this is matched by an equal amount of threats in the form of cyber crime. As a board, it is your collective job to work towards protecting the value of your company’s digital assets that can be badly affected by such crimes. 

A digital asset is simply a file that a company owns and controls the rights to, and it includes things like information held in databases, visual and/or architectural designs of the company, documented inventions like patents, digital photography, electronic addresses like the organisation’s domain name and digital currency. These might not be anything that you’d think require a large amount of protection, but cyber crime (like hacking, online scams, fraudulent activity and identity theft) is a recognised threat that is only increasing. 

According to a survey conducted by PriceWaterhouseCooper, reported cyber crime incidents had risen from 4th to 2nd place among economic crimes, with an estimated 50 organisations included in the report suffering over $5 million worth of loss, a third of which reported losses of over $100 million. And that’s only the reported cases. Companies are often not even aware they’ve become victims of these crimes until some time has passed, leaving them feeling powerless to deal with it.

Cyber crime is no small matter, nor is it theft of simple chump change. It takes a board to decide how to address these potential vulnerabilities and minimise the risk involved, though many companies aren’t as responsive as they should be. This may be because they don’t understand it as a very real threat, perhaps because cyber crimes involve things that aren’t tangible, but it’s still an important risk that every board should take into consideration.

Climate Risk

Climate change is often considered to be a problem that can be dealt with in the future, but it presents a very real risk to the entire world right now, including the boardroom. Sustainability has become centric to the business model, and there’s mounting pressure from outside influences – such as the general public, stakeholders and investors – who want to see their supported companies and organisations implement strategies that aim to tackle climate change. 

For boardrooms and businesses, climate change poses a very real financial threat. In February 2017, Geoff Summerhayes, an Australian Prudential Regulation Authority executive board member, made an impassioned speech to the Insurance Council of Australia Annual Forum, wherein he pushed for climate change being recognised as a risk management issue for businesses, stating ‘Some climate risks are distinctly “financial” in nature. Many of these risks are foreseeable, material and actionable now.’ 

Summerhayes goes on to say that risks also reside in the physical, with climate change having a direct impact on the environment, and subsequently impacting on ‘resource availability, supply chain disruptions or damage to assets from severe weather’ among other issues. Having a better understanding of these serious risks and implications will help identify and divert potential issues, as long as the risks are being recognised and dealt with.

Regardless of the sector your boardroom resides in, these are issues that should be on the table. If they’re not, be the first to shift the paradigm and bring it to the attention of your board. As a director, it is your duty and your right to do so.