Planning for 2016 is proving to be a significant challenge for Kiwi businesses, as increased uncertainty, volatility and complexity is creating more risk than ever.
This is according to RiskNZ, the sector body designed to help Kiwi organisations manage risk and prosper.
Geraint Bermingham, RiskNZ chairman, says, “We are living in interesting times. The immediate future creates a complex risk environment in which to do business.”
He says the financial indicators have ‘not been good’ so far this year.
According to RiskNZ, as deflationary pressures continue to rise, most major developed markets overseas are feeling the pressure. Various efforts to abate deflationary pressures have been ongoing for some time but the measures seem to have done little to mitigate the fundamental risk.
“To make matters worse, the multi-year term downward-slide in almost all major commodities including fuel, metals, agricultural raw materials, and food is if anything picking up pace,” says Bemingham.
Businesses and governments are struggling to understand how to respond to this economic landscape – asking themselves the question: will this abnormal situation become the new normal?
“Executives and those tasked with managing risk need figure what this means to their strategic risk profile. With regard to deflation, businesses may have to accept that the abnormal has become the normal.
“Given the lack of experience of such an environment, businesses need to be taking time out to look into the future - even to run simulation exercises to understand the risks and opportunities,” says Bermingham.
RiskNZ says adding to underlying structural weaknesses is the ongoing concerns of the unexpected war of cultures as represented by ISIS and other groups.
Furthermore, the new forces of the global internet is seemingly creating ‘in-your-face’ cultural tensions.
However, Bermingham says, “The power of social media is helping develop an army of super-enabled self-directed and in some cases apparently invisible ground troops.
“There are some obvious questions to be asked. Will this war reach our shores? Will young New Zealanders start to think twice about heading off on an OE? Will immigration pressures increase as people seek out safe countries? Conversely, could a major incident cause people to think twice about travelling and hence tourism take a hit?”
“There is no doubt these are interesting times - times where to prosper, businesses and other organisations need to apply best practice risk management processes, keep thinking ahead and remain agile,” he says.