With every new year, the world is a slightly different place, and each game-changing risk rises or falls in the list of priorities. While there is a much larger number of potential threats to businesses and financial institutions, a smaller number come to feature more prominently on any risk team’s schedule.

The risks of 2020 reflect the state of the world, in terms of technologies, workforce, regulation, crime, and world events.

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1. Digital transformation

There is a considerable amount of pressure on firms in many industries to transform their operations by implementing a range of digital solutions. These emerging technologies could include robotic process automation (RPA), artificial intelligence (AI), or cloud solutions.

Digital transformation comes with a range of risks, and these include business, strategy, compliance, product, and cultural threats. Digital transformation initiatives need to be closely linked to operational risk so that any emerging potential hazards can be managed.

2. Cyber threats

One of the top risks of 2020, the cyber threat has been fast on the increase in recent years, a trend that looks set to continue.

While cybercrime cost the world $3 trillion in 2015, this figure is forecast to have doubled by 2021. With cyber-attacks becoming more advanced by the day, organizations need to keep themselves informed and prepared for the new emerging threats.

Attacks that include malware, phishing, and Distributed Denial of Service (DDoS) are occurring more frequently, and smaller firms very often are unable to recover from damaging data breaches.

3. Data management and privacy

More recently, data privacy has become a more critical issue, and this is reflected in the stricter and more comprehensive ranging sets of regulations and legislation.

Examples of these include the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). The enforcement of more data privacy measures calls for careful data management and staying within compliance.

The regulations can help to improve data quality, which makes it more responsive to AI solutions, and less likely to cause damage to operations. With the threats that unlimited data can present, data management is a growing concern.

4. Third-party

Without a doubt, third-party vendors pose a considerable threat to businesses that heavily rely on contracting out a large number of tasks. Third-party vendors may, in turn, have their third-party vendors, and each other external party creates an additional weak link in the system.

Many banks and financial institutions use a smaller number of cloud providers, due to the concentration risk that they bring. Firms should ensure that they work together with third-party vendors to ensure they have effective joint business continuity plans in place. They should also make sure that third risks are aligned with the chances of the whole organization.

5. Resilience

In risk management, resistance is the term used to describe how easily a company can get service and operations back to normal after a disruption. Strength is the immune system of the organization. Disruptions may come in the form of cyberattacks, issues with third-party vendors, natural disasters, or industry-specific events.

In uncertain political times, the potential risk of insufficient resilience has all the more relevance. It is essential for operational risk teams to carefully consider resilience and review the impact controls that are in place. The challenges of resistance can be better realized with scenario analysis.

6. Talent

Talent, or workforce risks, are those that originate from employees. Firms may have the intention of retaining their staff, but in industries that are characterized by growth and change, a high turnover of staff is often inevitable. The most talented individuals may choose to work for startups with winning workplace culture and chances for an equity stake.

Businesses may also be forced to make employees redundant, and these disruptions, along with marketing and regulatory changes, cause a higher number of vulnerabilities. Risk management needs to take into account the differences in hiring and firing and update the model accordingly.

7. Geopolitical

Global events seem unlikely to slow down or prove any more predictable. As the world is continually reeling from each new presidential election, natural disaster, political protest, or viral pandemic, the business world and the economy are inevitably impacted.

We are all regularly in the process of waiting to see how the most recent events will mean for share prices, or how regulations or tariffs will be changed. As yet, no one can be sure what an independent Britain will genuinely look like, with a vast number of questions still left unanswered.

Risk management may not be the most appealing aspect of running an organization, but it is undoubtedly a necessary one. The damages that each risk represents can be crippling or even fatal for smaller organizations. In all cases, firms must have the appropriate resources for managing risks, and the program is updated accordingly.