The COVID-19 outbreak has provided a huge and unexpected shock to global business and economic systems. Yet as recent BDO research shows, threats to business operations and reputations are a regular occurrence.

We recently surveyed 500 C-suite executives across Europe, the Middle East, Africa, Asia-Pacific and the Americas to explore how reputational risk is perceived and managed. The results, presented in our report Global Risk Landscape 2020: The integrity index, indicate that threats to corporate reputation are constant. In our survey, 70% of respondents believed their organisation had experienced an event that posed a threat to its reputation. The threat level was particularly acute among family businesses (91%) and in the manufacturing sector (89%).

Few management teams could have predicted the fast-reaching global effects of the COVID-19 outbreak. However, events such as this and the 2008 banking crash and recession, Brexit and the rapid pace of technological change highlight the need for organisations to be adaptable and agile. Experience also shows that businesses can recover and grow after such events, as long as they adopt the right tools and procedures to respond to risks.

In our survey, 58% of respondents thought that when it comes to reputational damage, effective preparation is more important than the event itself, or a business’s response to the event. However, only 45% of respondents described their organisation’s reputational crisis strategy as proactive.

Asked to identify the risks they felt their business was most unprepared for in 2020, economic slowdown and recovery topped the list (identified by 37% of respondents), followed by the threat from computer hacking, viruses and malicious codes (34%), and business interruption (28%).

The problem is such events do occur – perhaps more often than we know. During the COVID-19 outbreak, hackers and other cyber criminals have been trying to exploit the situation. For example, a sudden increase in remote working may have exposed weaknesses in internal controls, increasing opportunities to access and exploit sensitive and valuable data.

How can businesses mitigate risks effectively and prepare for the future?

Businesses can take action to protect themselves and strengthen their defences. Traditional scenario planning to consider the impact of different events on the business remains highly valuable. Business continuity plans can then be developed to outline how the organisation would respond to different threats. These plans then need to be documented and communicated across the organisation.

Visualising what your business might look like in future – and how current operations and models might need to adapt – is particularly important at the current time. In an uncertain world, new organisational challenges require everyone to work together and rethink how businesses and the economy operate, to create growth for the good of all. At BDO, we have developed a model – called Rethink – to provide a roadmap of support throughout the COVID-19 outbreak and beyond, helping businesses to succeed in the new world that lies ahead.

A rethink strategy may come as a direct result of initial actions to react to the challenges created by an unexpected event such as COVID-19, as well as efforts to embed resilience and keep the business running in the short to medium term. The ultimate phase of the model focuses on realising the potential of the business in the new operating environment that emerges in the longer term, bringing the new business vision to life and sustaining client relationships. It’s also vital that businesses anticipate any further critical changes that will impact their operations and value chain.

All businesses, regardless of size, sector or location, will need to imagine a ‘new world’ as early as possible and rethink how to position themselves within it. But this is particularly important for the UK’s economic engine of mid-sized businesses that account for almost a third of UK turnover and are responsible for a third of UK private sector jobs. These ambitious, entrepreneurially-spirited and high growth businesses hold the key to speeding up the UK’s recovery and the return to sustainable economic growth. It’s essential that policymakers listen to the owners and management teams leading these businesses, delivering the support they need to deliver their Rethink strategies and continue building thriving enterprises.

As we all emerge into the new operating environment, our Global Risk Landscape 2020 survey shows that the integrity shown by businesses and their leaders will be important. The public remains vigilant about the behaviour of companies. One in three survey respondents believe their customers are less confident that the brand will do what is right compared to five years ago. Embedding a sense of trust is vital for business survival, particularly now that businesses’ ethical decisions have even more impact on people’s health, stability and income.

For the full research analysis, download our Global Risk Landscape 2020 report.

Nigel Burbidge is Global Chair and Partner of Risk and Advisory Services at BDO.

“As we all emerge into the new operating environment, embedding a sense of trust is vital for business survival, particularly now that businesses’ ethical decisions have even more impact on people’s health, stability and income.”

Nigel Burbidge, Global Chair of Risk and Advisory Services at BDO

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