Businesses across Europe face a perfect storm of risks threatening their ability to weather tight economic conditions and bounce back when the climate improves, according to the Chartered Institute of Internal Auditors Risk in Focus 2024 report.
The report brings together findings from a survey of almost 800 CAEs heading towards the end of the calendar year.
MBK Search has summarized five key points from the report:
1) Cybersecurity and data security
Cybersecurity and data security retained its number one ranking in the risk report’s survey of 799 Chief Audit Executives across Europe. While some businesses are improving their cyber maturity, the online environment looks set to become even more dangerous with the rise of “wiper” malware attacks and the use of AI hacking tools. New EU regulations around digital operational resilience and disclosures are helping strengthen cybersecurity governance.
2) Human capital challenges
Attracting and retaining talent rose to second place in the rankings, with 58% of respondents citing it as a top five risk, up from 50% last year. Businesses are faced with a shift in culture and expectations among employees post-pandemic. Communicating corporate purpose and building diverse and inclusive cultures is now vital for talent retention. “One of our biggest risks is trying to keep up with the pace of expectations coming from staff,” said one audit leader in the report.
3) Macroeconomic and geopolitical uncertainty
The report ranked macroeconomic and geopolitical uncertainty as joint third in the list of key risks faced by European organisations this year. With high inflation, rising interest rates, the war in Ukraine, and faltering globalisation, the economic impact “is happening right now as we speak”, said one audit executive. Businesses must remain resilient, while also maintaining an ability to innovate and invest for the future when conditions improve.
4) Climate and sustainability compliance
While climate change risks slipped down the rankings this year, new sustainability reporting requirements such as the EU’s Corporate Sustainability Reporting Directive will drive it up to third place by 2027, respondents predicted. But businesses cannot focus simply on compliance. Setting clear targets aligned with strategy is vital. “By doing these assessments you can get ahead and use the information to your competitive advantage,” commented one audit executive.
5) Strengthening supply chain resilience
With macro uncertainty, insolvency risks, climate change and new regulations, 30% of respondents cited supply chain threats as a top five risk. The drive to diversify sources of supply has become a top priority. “I need to know if my supplier is 100% committed to providing me with what I need, otherwise I could be out of business,” an audit leader told one of the report’s roundtables.
Audit chiefs participating in the research stressed the need to go beyond compliance-focused audits in these turbulent times and rapidly provide more agile, targeted advice that helps strengthen resilience and strategy across all the business risks. As one put it: “CAEs must participate in discussions about the governance structure of the organisation so that silos are opened up.”