Top 10 Risks for Aussie Businesses

1. Increased Frequency and Severity of Natural Disasters: Australia is no stranger to bushfires, floods, cyclones, and heat waves. As changes to weather continue to impact communities, Insurers will continue to increase premiums and after risk assessment, may decide to no longer offer property or business interruption cover in some areas. It’s essential that insurance and risks are considered when relocating or purchasing new premises. 
2. Business interruption (including supply chain disruption): Following the impacts to businesses from Bushfires, East Coast Storms and flooding, COVID-19 or the Ukraine War, it’s clear the Business interruption risk is not usually a particular event, location or product. It can be local or from overseas. Business interruption from Cyber incidents was the highest concern for business, followed by interruption to Power supplies. Natural Catastrophes, Fire at the premises or nearby and Supplier failure were the top 5 areas of concern.   The most common action taken by companies to de-risk supply chains and make them more resilient is to develop alternatives or have multiple suppliers within the country or overseas. It is important to focus on business continuity management, planning for the worst to minimise any impact to the business, cash flow, employees, and customers.
3. Climate change: whatever the cause the increase in bushfires, severe weather and flooding over the past 3 years has devastated many communities and destroyed businesses. Major economic and environmental reports point to the continuation of these catastrophes over the coming decades. Coastal erosion and inundation of low-lying areas due to storms were noticed 2 – 3 years ago, with increased storm frequency and volume of stormwater runoff. The NSW Government recently announced a plan to buy back homes in Lismore, most at risk of continual river flooding, at an average $287,000 for each home. Local, State and Federal Governments will need to cooperate to meet this challenge and regulatory changes are expected.
4. Internal & External Cyber Threats: With increased digitisation over the past 3 years, driven by work from home during Covid-19, small and medium-sized businesses are more exposed than ever before to cyber criminals, as well as malicious attacks from staff and contractors. Maintaining and improving areas of cyber hygiene, such as updating the latest cyber security tools, including anti-virus software, frequency of IT security training, cyber incident response plans and cyber-security governance. Incident response is critical as the cost of a claim quickly escalates once business interruption kicks in. Many businesses may find it difficult to survive a major cyber incident, with reputational damage, loss of client/ income and breach of Privacy complaints or investigations. 
5. Global & Australian (Macro) events include the Russian invasion of Ukraine and the related energy crisis, resulting in falling real incomes and profits in Europe, with a flow-on effect on consumption and production. China has a problem with a slowing economy and the key property development sector.  Other factors include the Cost of Living Crisis, inflationary pressures, monetary tightening, soaring costs associated with the energy crisis, supply chain disruptions and noticeable staffing shortages. One impact has been a 19% increase in business failures globally, which is expected to increase over the coming year. Organisations need to plan to be more agile and able to adapt their business models depending on the current economic, political, and competitive landscape.
6. Skilled Workforce shortages: found to be most critical in the aviation, professional services, construction, and engineering sectors. Shortages became apparent during COVID-19 and have continued due to border closures and low rates of immigration. Inflation has also resulted in increasing wages, creating pressure on margins and profits for many businesses. A recent McKinsey Consulting report found that 37% of staff are looking to change employers in the next 6 months, with the main reasons being more money; career advancement, burnout, or lack of work-life balance. 
7. Regulatory Changes: Staying abreast of and compliant with new regulations is essential. The need for oil and gas and the price shock due to the Russian invasion of Ukraine was a driving force worldwide for decarbonisation and renewed impetus to overcome the substantial obstacles to using renewable energy. Europe recently adopted the Corporate Sustainability Reporting Directive (CSRD), impacting all companies. The CSRD requires all aspects of a business to be included in reporting, including non-financial factors such as sustainability, social and environmental. Other regulatory changes are likely to arise from inflation, higher interest rates, and cyber-security mandated by the government. 
8. Health Pandemics: The health and wellness of employees moved to the top of business concerns and remains a high priority. COVID-19 demonstrated the global impact of pandemics on health and travel and all sectors of the Australian economy, with some vaccination mandates still in force.  It also changed forever the daily working routine of many employees as WFH was enforced during lockdowns. Technology and Cloud Storage became essential, connecting workers remotely to workplaces, with the challenge of keeping data secure and private.
9. Energy: The Australian Energy Market Operator (AEMO) recently warned that Victoria and South Australia face an increased risk of rolling blackouts this summer, as the return of an El Niño weather pattern brings a hot, dry summer with more wind-less days. The main reasons are summer being hotter and drier with less wind, unplanned power outages from ageing coal and gas power stations, and delays in new power sources coming online. Moving to Renewables will require billions of dollars in investment, further increasing the pressure on energy prices, already impacted by the invasion of Ukraine and a demand surge due to economic recovery post-Covid-19. The transition will also cause large job shifts across sectors and regions, requiring more skilled workers, with lower-skilled workers hardest hit. A new social contract is needed to address these challenges and long-term benefits. 
10. Market developments: Intensified competition, new competitors, new technology such as AI, Mergers and acquisitions, inflations, Cost of Living pressures on consumer spending and the potential for a recession. Australia's ageing population will impact society, from tax collection and government spending to the expansion of aged care and related products and services.

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1. Increased Frequency and Severity of Natural Disasters: Australia is no stranger to bushfires, floods, cyclones, and heat waves. As changes to weather continue to impact communities, Insurers will continue to increase premiums and after risk assessment, may decide to no longer offer property or business interruption cover in some areas. It’s essential that insurance and risks are considered when relocating or purchasing new premises. 
2. Business interruption (including supply chain disruption): Following the impacts to businesses from Bushfires, East Coast Storms and flooding, COVID-19 or the Ukraine War, it’s clear the Business interruption risk is not usually a particular event, location or product. It can be local or from overseas. Business interruption from Cyber incidents was the highest concern for business, followed by interruption to Power supplies. Natural Catastrophes, Fire at the premises or nearby and Supplier failure were the top 5 areas of concern.   The most common action taken by companies to de-risk supply chains and make them more resilient is to develop alternatives or have multiple suppliers within the country or overseas. It is important to focus on business continuity management, planning for the worst to minimise any impact to the business, cash flow, employees, and customers.
3. Climate change: whatever the cause the increase in bushfires, severe weather and flooding over the past 3 years has devastated many communities and destroyed businesses. Major economic and environmental reports point to the continuation of these catastrophes over the coming decades. Coastal erosion and inundation of low-lying areas due to storms were noticed 2 – 3 years ago, with increased storm frequency and volume of stormwater runoff. The NSW Government recently announced a plan to buy back homes in Lismore, most at risk of continual river flooding, at an average $287,000 for each home. Local, State and Federal Governments will need to cooperate to meet this challenge and regulatory changes are expected.
4. Internal & External Cyber Threats: With increased digitisation over the past 3 years, driven by work from home during Covid-19, small and medium-sized businesses are more exposed than ever before to cyber criminals, as well as malicious attacks from staff and contractors. Maintaining and improving areas of cyber hygiene, such as updating the latest cyber security tools, including anti-virus software, frequency of IT security training, cyber incident response plans and cyber-security governance. Incident response is critical as the cost of a claim quickly escalates once business interruption kicks in. Many businesses may find it difficult to survive a major cyber incident, with reputational damage, loss of client/ income and breach of Privacy complaints or investigations. 
5. Global & Australian (Macro) events include the Russian invasion of Ukraine and the related energy crisis, resulting in falling real incomes and profits in Europe, with a flow-on effect on consumption and production. China has a problem with a slowing economy and the key property development sector.  Other factors include the Cost of Living Crisis, inflationary pressures, monetary tightening, soaring costs associated with the energy crisis, supply chain disruptions and noticeable staffing shortages. One impact has been a 19% increase in business failures globally, which is expected to increase over the coming year. Organisations need to plan to be more agile and able to adapt their business models depending on the current economic, political, and competitive landscape.
6. Skilled Workforce shortages: found to be most critical in the aviation, professional services, construction, and engineering sectors. Shortages became apparent during COVID-19 and have continued due to border closures and low rates of immigration. Inflation has also resulted in increasing wages, creating pressure on margins and profits for many businesses. A recent McKinsey Consulting report found that 37% of staff are looking to change employers in the next 6 months, with the main reasons being more money; career advancement, burnout, or lack of work-life balance. 
7. Regulatory Changes: Staying abreast of and compliant with new regulations is essential. The need for oil and gas and the price shock due to the Russian invasion of Ukraine was a driving force worldwide for decarbonisation and renewed impetus to overcome the substantial obstacles to using renewable energy. Europe recently adopted the Corporate Sustainability Reporting Directive (CSRD), impacting all companies. The CSRD requires all aspects of a business to be included in reporting, including non-financial factors such as sustainability, social and environmental. Other regulatory changes are likely to arise from inflation, higher interest rates, and cyber-security mandated by the government. 
8. Health Pandemics: The health and wellness of employees moved to the top of business concerns and remains a high priority. COVID-19 demonstrated the global impact of pandemics on health and travel and all sectors of the Australian economy, with some vaccination mandates still in force.  It also changed forever the daily working routine of many employees as WFH was enforced during lockdowns. Technology and Cloud Storage became essential, connecting workers remotely to workplaces, with the challenge of keeping data secure and private.
9. Energy: The Australian Energy Market Operator (AEMO) recently warned that Victoria and South Australia face an increased risk of rolling blackouts this summer, as the return of an El Niño weather pattern brings a hot, dry summer with more wind-less days. The main reasons are summer being hotter and drier with less wind, unplanned power outages from ageing coal and gas power stations, and delays in new power sources coming online. Moving to Renewables will require billions of dollars in investment, further increasing the pressure on energy prices, already impacted by the invasion of Ukraine and a demand surge due to economic recovery post-Covid-19. The transition will also cause large job shifts across sectors and regions, requiring more skilled workers, with lower-skilled workers hardest hit. A new social contract is needed to address these challenges and long-term benefits. 
10. Market developments: Intensified competition, new competitors, new technology such as AI, Mergers and acquisitions, inflations, Cost of Living pressures on consumer spending and the potential for a recession. Australia's ageing population will impact society, from tax collection and government spending to the expansion of aged care and related products and services.

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This article originally appeared on Insurance Advisernet and has been published here with permission.