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 incidents topped the risk list for Australian businesses this year for the first time, according to the annual Allianz Risk Barometer (see table).ii
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
third party had accessed information about staff, applicants and referees. The company hired a cyber security
firm to evaluate their systems and identify improvements.
How to prepare: Cyber insurance is now readily available, but prevention is equally important. This is not just the responsibility of the IT person, everyone in the business needs to take responsibility. All it takes is a laptop left at the airport lounge to compromise your systems. Visit the government's Australian Cyber Security Centre website to report an incident or for safety tips.iv
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.
What to do: A person or department within the business should have responsibility for monitoring local, state and federal government legislation as part of their job description.
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.
What to do: These things are largely outside your control, but you can keep an eye on developments with the potential to impact your business so you can develop strategies to mitigate the risks. For example businesses that rely on one product, service, customer or market, might diversify or explore new sales avenues.
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.
What to do: It's vital to stay up-to-date with changes affecting your industry so you are not left behind. Many larger companies are collaborating with start-ups or developing agile in-house teams to explore new ways of doing business and engaging with customers. Smaller businesses need to constantly learn new skills, hire people with the skills they need or outsource.
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.
What to do: Hiring a public relations or marketing professional may help in a crisis. But the best way to prevent the risk is to promote a positive workplace culture, best industry practices and a focus on great customer experience at every contact point.
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 on 8322 5088.