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These days, business risks can emerge suddenly and cause significant damage to operations. For example, a ransomware attack on Ascension hospitals in 2024 paralyzed critical networks, cut off access to patient records, and cost $1.3 billion to remedy. Consumer backlash to brand decisions can be equally swift and brutal. To help your organization adapt, this guide analyzes recent examples of enterprise risk and highlights key lessons.
Enterprise risk management frameworks help your brand evaluate, prepare for, and mitigate a range of business threats.
Any risks that put your day-to-day operations in danger must be dealt with ASAP. Operational risk stems from:
External factors are having an increasing impact on enterprise organizations. What happens if one of your suppliers fails to deliver parts on time? Your ERM program must take supply chain disruptions and third-party failures into account, not just in-house processes under your control.
Financial threats are especially serious because they often have trickle-down effects on other areas of business. Inadequate working capital can hurt hospitals, software developers, pharmaceutical manufacturers, retailers, and other enterprises. Financing challenges can make expansion projects and growth opportunities practically impossible.
Enterprise financial risks come in many forms:
ERM frameworks provide a wide-angle view of credit, debt, and capital risks. This can contribute to a healthier financial profile throughout your organization.
Strategic risks refer to dangers from your company’s business strategies, objectives, and decisions. All organizational decisions carry an element of risk, especially when embarking on new projects or shifting directions.
It’s not always easy to pin down the root cause of strategic risks:
New product releases always carry significant risk for enterprises, whether they’re AAA video games, household mainstays, or B2B solutions. The product may not appeal to the target audience, or customers may not like the item. Low sales can quickly turn a smart strategy into a quagmire of costs.
Enterprise risks from security vulnerabilities range from loss of sensitive business data to disruption of operations:
Enterprises can’t afford to underestimate or downplay the increase in cyberattacks around the world. Ransomware attacks, data breaches, and state-sponsored hacking can hit organizations in any industry and any country. Total cyberattacks doubled between 2016 and 2022, reaching nearly 500,000 incidents.
The regulatory landscape changes frequently. Achieving and maintaining compliance is often challenging, especially for enterprise-level businesses. Common compliance risks include penalties and fees for violations, worker noncompliance with policies, reputational harm from failures, and spiraling personnel costs.
Depending on industry and operations, your organization also needs to include risk subcategories in ERM processes:
6. Employee health and safety risks: Hazards, fires, and workplace injuries
7. Reputational risks: Ethical misconduct, employee fraud, product recalls, negative publicity, and consumer boycotts
8. Technology risks: Network failures, equipment breakdowns, unproductive investments, and system obsolescence
9. Legal risks: Contractual disputes, class action lawsuits, and legal action by shareholders
10. Environmental risks: Natural disasters, damage to company infrastructure, loss of data, rising energy costs, and eco-friendly consumer expectations
11. Political risks: Shifts in trade policies, interest rate changes, supply chain difficulties, and regulatory hurdles
To accurately assess the risks that affect your organization, it’s vital to regularly consult with a range of stakeholders, from HR and legal teams to cybersecurity professionals and compliance officers.
Recent enterprise risk examples underscore the importance of performing comprehensive assessments as part of an ERM framework.
On July 19, 2024, CrowdStrike pushed a defective update to its endpoint detection and response software, triggering widespread system crashes. The company’s clients included major airlines, government agencies, hospitals, and hotel chains. American Airlines, United Airlines, and Delta Airlines were forced to cancel thousands of flights over several days, and the total cost of the mistake could reach over $1 billion.
Uninsured deposits, high-risk credit, and liquidity problems triggered the rapid collapse of Silicon Valley Bank, Credit Suisse, and similar lenders. SVB had over 50% of its assets in fixed-income securities — highly susceptible to interest rate fluctuation — and only 7% in liquid capital. The result was a $40 billion run and the bankruptcy of SVB practically overnight.
Paramount Global seemed like an ideal candidate to take on Netflix and its declining subscriber numbers. Paramount+ hasn’t become the golden goose investors hoped, however.
In 2023, first-quarter losses hit $1.2 billion. A proposed merger with Skydance Media has faced obstacles on both sides, along with shareholder complaints and FCC involvement.
Another recent example of enterprise risk from business strategies is Bud Light’s 2023 marketing miscalculation. One poorly evaluated decision ended up wiping out 20% of its stock price and 30% of its U.S. sales after a consumer boycott.
If there’s one lesson to be learned from these examples of enterprise risks, it’s that you need all the data you can get. Comprehensive insights into your customers, workers, global operations, and compliance challenges can help you make smarter decisions. Discover Compyl’s risk management tools and make your ERM program more accurate than ever.
