Protect your business against risk
In June 2018, promising Melbourne start-up Unlockd went into voluntary administration blaming Google.i This was not a risk Unlockd or its high-profile backers including Lachlan Murdoch saw coming, but that’s the thing with business risk, it can strike when you least expect it.
Unlockd had developed an app that rewarded users for watching ads when they unlocked their phone. Just as they were planning an initial public offering (IPO), Google threatened to remove their app from its play store saying it breached company policy. This was a fatal blow because the app only worked on Google android phones.
Unlockd started legal proceedings, accusing Google of anti-competitive conduct, but it was too late to save the IPO. Without replacement capital, the company had no choice but to wind up.
It’s always risky to rely on one monopoly product or service provider, especially when you’re breaking new ground. In an increasingly global and connected business environment, new risks are emerging alongside more traditional ones. Here are some suggestions on ways you can identify and mitigate risks to your business.
Cyber security
Cyber incidents topped the risk list for Australian businesses this year for the first time, according to the annual Allianz Risk Barometer (see table).ii Cyber risk can be anything from ransomware – where attackers demand money to go away – to hackers, data theft, privacy breaches and denial of service attacks.
For example, in June 2018 online recruitment company PageUp notified customers about suspicious activity on their network.iii An unauthorised third party had accessed information about staff, applicants and referees. The company hired a cyber security firm to evaluate their systems and identify improvements.
Changes in legislation
Governments are under ongoing pressure to protect consumers and business with new regulations. From privacy and data protection laws affecting global corporations such as Facebook, to local Airbnb hosts in some locations facing new restrictions on how many nights they can accept paying guests.
For businesses caught up in new legislation, the financial costs due to compliance and loss of trade can be significant.
Macroeconomic developments
In an increasingly global marketplace, the prospect of a trade war between the US and China is a major threat to Australian businesses. A slowdown in China’s economy could detrimentally impact sales of everything from Australian wine to inbound tourism operators.
Fluctuations in the Australian dollar, commodity prices, house prices and even the weather also have the potential to stimulate or depress economic activity.
Market disruption
Digital disruption and the effects of local and global competition are existential threats to many businesses these days. Like the taxi drivers who invested hundreds of thousands of dollars in a taxi licence only to be sidelined by Uber drivers picking up fares in their own car.
While the Internet has been a boon for business, it also means competitors from Bondi to Mumbai are only a click away from your local customer base.
Loss of reputation or brand value
The Internet has also increased the risk of damage to business reputations and brands. While positive reviews from sites that allow customers to review and rate your business can contribute strongly to business growth, negative reviews can hurt. Poor reviews are not always justified as the process is open to exploitation by people with a grievance and even competitors masquerading as customers.
Social media and online petitions allow people to air damaging views about a business or industry. Campaigns against the live export trade gained momentum on social media and led to political action that had a profound impact on the industry.
These are just some of the potential risks facing businesses today; the actual risks will depend on the nature of your business and the environment you operate in. Insurance is part of the solution but just as important, is awareness. If you would like to discuss your business risk and potential solutions, give us a call.
i https://unlockd.com/statement/
iii https://www.pageuppeople.com/unauthorised-activity-on-it-system/
As always, if you would like to discuss the contents of this newsletter please give us a call 07 5559 5760.
Hugh Robertson