The overlooked risk for which your business clients need to plan

In the aftermath of the pandemic, all sights are set on cybersecurity, talent acquisition and economic recession as top business risks, but companies should also focus on preparing for physical threats, says Mark Herrington of the risk intelligence firm OnSolve.

“At a time when the national discourse remains focused on a possible recession, many businesses are taking another look at their P&Ls [profit and loss statements],” Herrington writes in a Harvard Business Review blog. “As they contemplate current budgets and possible future expenses, investment in physical security is likely to come into question.

“But threats to physical assets don’t stop because of an economic downturn. The hurricane approaching your coastal HQ doesn’t care that there’s a recession looming.”

Cybersecurity risk is identified as the Number 1 risk facing global businesses in a 2022 PwC PulseSurvey. Forty per cent of the 722 U.S. executives surveyed in August 2022 cited more frequent and/or broader cyberattacks as a serious risk, with another 38% calling it a moderate risk. Plus, cyber incidents are the new top business concern for Canadian companies in 2023, according to the Allianz Risk Barometer 2023.

But Herrington said an analysis of physical risks around the globe show attention should also be paid to preparing for physical risks to people and to property. “CEOs need to apply the same rigor to physical security as they do to cybersecurity,” Herrington says.

He calls on business leaders to create new risk frameworks and scenario-test crisis response plans within the organization.

For which physical threats should companies be planning their risk strategies? It will depend on the business sector and geographic location, Herrington observes. For example, a meat packing facility along the Atlantic Coast may have hurricanes listed near the top of their risk priorities, while a financial services firm in the B.C. Interior may be more concerned about wildfires.

OnSolve conducted a research survey on physical threats facing companies globally in August 2022. It outlines the top risks for businesses that have occurred as a percentage of all events detected globally between Jan. 1, 2020, to July 1, 2022. OnSolve detected more than 14 million global events, or physical threats, in 159 countries between 2020 and 2022.

The research findings show four “critical” physical risks facing companies, based on data from the past two years. Several of these emerging risks point to the fraying of societal cohesion coming out of the pandemic.

Shooting-related risks were up by 193% globally (and 245% in the U.S.). This shows the need to plan for the possibility of securing your business facilities in the event of an active shooter scenario.

Next came transportation-related risks, up 145% globally over two years. These included the impacts on your business (and your clients) of things like aircraft accidents, maritime accidents, train accidents or road accidents. The risk here would be a supply chain disruption for the company, for which it needs to be prepared.

Third came crime risks, up by 141%. Examples are arson, assault, bombing, hijacking, homicide, hostage taking, sexual assault, and theft. Some risks associated with crime include unplanned operational downtime, customer churn, a damaged brand reputation, a loss of investor confidence, and a potential loss of partner, vendor or supplier relationships.

Fourth is commercial property fires, with 118% more reported incidents over two years. OnSolve attributes this to the decline on global infrastructure and encourages investment in areas critical to maintenance of business operations.

Although extreme weather did not crack the Top 4 critical risks globally, it did rank seventh, with 41% more reported threat incidents. The Top 7 global severe weather threats identified in the report included, in order:

Avalanche (202% more incidents over two years)
Winter storm/Blizzard (+197% more incidents)
Volcano (+115%)
Tsunami (+114%)
Tornado (+78%)
Wildfire (+74%)
Severe storm (+54%)

Feature photo courtesy of iStock.com/MediaProduction