A new Chartered Institute of Internal Auditors poll reveals the key risks that businesses are concerned about and finds that cyber security worries have been overtaken by financial, liquidity, and insolvency business risks.
With businesses continuing to grapple with an uncertain economic outlook - fuelled by interest rate hikes, high inflation, the cost-of-living crisis, and turbulence in the banking sector - six in ten Chief Internal Auditors report that concerns over the economic downturn are exacerbating financial, liquidity, and insolvency fears. In a similar poll last year, financial, liquidity, and insolvency risk ranked well outside the top five risks to businesses, trumped by other key risks like cyber security, changes in laws and regulations, and digital disruption. However, this new research ranks it as the number one risk (up from ninth place).
Other top risks exacerbated by concerns about the economic outlook include market changes, competition and changing consumer behaviour, macroeconomic and geopolitical uncertainty, talent management and retention, and supply chains. This means that businesses ‘continue to face the perfect storm of interconnected risks’ says the Chartered Institute of Internal Auditors.
Chief Audit Executives reported that the top five risks, which have been exacerbated by economic uncertainty are:
- Financial, liquidity and insolvency (62 percent)
- Market changes, competition and changing consumer behaviour (60 percent)
- Macroeconomic and geopolitical uncertainty (50 percent)
- Human capital, diversity, talent management and retention (48 percent)
- Supply chain, outsourcing and third-party risks (43 percent).
The results of this poll highlight the need for business leaders to work with their internal audit functions to ensure they are prepared for the unexpected. This should include reviewing business continuity and crisis management plans to ensure they are fit for the economic unknowns that could arise in the months ahead. As well as undertaking economic simulation exercises, along with financial stress testing based on a range of different economic scenarios.
About the research
The research was carried out over the course of March and April 2023. The part of the research that focussed on understanding the business risks most impacted by concerns of an economic downturn and ongoing economic uncertainty was based on a quantitative survey of 799 Chief Audit Executives from 17 European countries. Countries represented included: Austria, Belgium, Bulgaria, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, The Netherlands, Norway, Poland, Spain, Sweden, Switzerland and the UK.