Risk averse
The new threats to business
New Zealand directors are seriously worried about the threat of cyber attacks – but many do not have any framework in place to deal with them.
Sunday Business can reveal today that the latest Marsh Directors’ Risk Survey Report has highlighted the business risks keeping executives up at night. Almost 80 per cent of respondents said the impact of a cyber attack on their company would be significant.
But although it was rated the biggest external risk by New Zealand businesses, ahead of natural catastrophes, a third did not have an effective framework to manage that risk.
The Marsh report said there was a real and growing threat that a cyber incident could blindside those unprepared organisations. Between June 2015 and June 2016, there was a 25 per cent increase in the number of data loss incidents in New Zealand. Total losses were estimated to be between $300 million and $400 million a year.
Country head of Marsh New Zealand Marcus Pearson, said the risks businesses faced were ‘‘amazingly different’’ to what they were 10 years ago.
Cyber attacks were the new frontier for organised crime, as companies were held to ransom and cyber attackers were available for hire.
‘‘It doesn’t matter if you’re in a regional town operating a small business or a listed company, they will get through and they have got through,’’ he said. ‘‘Boards need to focus on that exposure and get an understanding, work out what’s available to protect yourself.’’
Felicity Caird, governance leadership centre manager at the Institute of Directors, said it was worrying that some boards were illprepared. ‘‘It’s the biggest risk, but at the same time boards are not confident they can respond. That’s pretty concerning. There are examples all the time of the damage a cyber attack can do.’’
Yahoo agreed this week to cut US$300m off its sale price in its deal with Verizon because of the impact of hack attacks.
‘‘We’ve got to put cyber on the agenda before it becomes the agenda,’’ Caird said.
It is not mandatory to report cyber breaches in New Zealand and Caird said that meant there was less awareness of the potential for what could occur. ‘‘[Businesses] think [reporting breaches] shows weakness but if we share information we can all be better prepared.’’
The directors rated IT disruption as the internal risk with the most potential to affect their organisation.
The directors surveyed expected 2017 to be a riskier year than 2016. But Pearson said New Zealand worries were standard business risks, compared to some of the things on international risk radars.
A similar global survey found that around the world directors were most worried about largescale, involuntary migration, failure of governments, extreme weather events and weapons of mass destruction.
Jason Grace, of beauty product distribution firm Grace Beauty, said the biggest risk to his business was movement in the exchange rate. As an importer and distributor, any movement that made the New Zealand dollar weaker against the US could have a big impact, he said.
He said if the dollar fell back to the mid-US60c range in the next 12 months, as has been predicted, it would have a big impact on what it cost to bring products into the country and as a result the retail price. ‘‘Consumers are used to buying at competitive pricing.’’
Consumers are used to buying at competitive pricing and any increase in prices, they don't have a huge appetite for. Jason Grace