Impact of redundancies biggest business risk

by 29 Jul 2009

Supply chain issues and the impact of redundancies are now the two biggest risks facing business.

Although wide-ranging cost-cutting has been a necessary re sponse by many businesses to the GFC, inevitably this has come at a price and supply chain issues and the impact of redundancies on business effectiveness have now emerged as the two biggest risks to business operations.

A poll by the Institute of Chartered Accountants in England and Wales and disaster recovery specialist SunGard Availability Services, conducted ahead of a round table debate, also showed that two-thirds of organisa tions that responded said they believe they face greater operational risks compared with 12 months ago.

More than 70 per cent of those polled at and shortly before the round table event – which was attended by chief financial offi cers, finance directors and heads of opera tional risk – said the risk of disruption caused by supply chain issues had dramatically in creased over the last year, along with con cerns over the stability and resilience of small er supplies and partners in the difficult economic climate.

The impact of redundancies and cut backs on the effectiveness of day-to-day operations was also cited by more than 50 per cent of delegates as a growing cause of concern.

Roland Brook, associate director at ac countancy firm Smith & Williamson, em phasised that the threat of collapsing sup ply chains had become a vital issue for many managers during the recession.

“Resilience has become much more of a major focus for our clients over the past year as many have had to contend with new threats such as supply chain disruption, which have dramatically increased in the recession,” he said. “There is now a real un derstanding across many levels of business that firms simply cannot afford any inter ruptions to critical business operations.”

Added group operational risk manager at Investec, Asim Balouch: “It’s quite telling that most organisations are planning to increase investment in areas such as network and communications infrastructure, servers and security. Organisations are becoming increasingly aware that they cannot operate effectively without having a complete understanding of their data and the way that their IT systems underpin operational efficiency and integrity.”

According to managing director UK and executive vice president Europe for SunGard Availability Services, Keith Tilley: “All organisations need to assess the impact that disruption to their supply chain could have on their business and have plans in place to continue normal operations should a supplier run into problems. What is encouraging about this research, however, is that resilience is now being discussed at the highest levels of decision-making within more and more organisations, whereas before it was often overlooked and left to the IT department to look after.”

IT advisory partner with Baker Tilly and chairman of the ICAEW IT Facility, John Oates, who chaired the event said: “In the last 12 months we have seen operational risk rise up the business agenda as organisations identify new threats to their business, not least that caused by growing numbers of redundancies, both in terms of knowledge and malicious attempts by departed employees to exact revenge on their employers. More than ever, organisations need to create contingency plans that are water-tight and workable, but also flexible enough to cope with the new and unexpected threats thrown up by the current economy.”

KEY FINDINGS:

• Sixty-five per cent of those polled believe that levels of operational risk have increased within the past year;

• Seventy per cent believe they are at more risk from damaging supply chain issues (e.g. business partners going out of business compared to a year ago);

• About half state that redundancies and cost reductions have impacted on effectiveness of day-to-day operations and increased operational risks; and

• A third say that risk and resilience issues are now discussed at board level.

COMMENTS

Most Read