The gap between awareness and action taken on geopolitical risk is ‘alarming’, as tensions grow between the West and China

The War in Ukraine, coupled with the cost-of-living crisis, has significantly changed business attitudes on the risks they face with geopolitical tensions exacerbating and intensifying a wide range of business-critical risks.

This is according to the annual Risk in Focus 2023 report, which has been published by the 14 audit institutes.

With the War in Ukraine raging on, the spike in global energy prices, soaring inflation, as well as growing tensions between the West and China, the gap between awareness and action taken on geopolitical risk is ‘alarming’, according to IIA.

It is urging business leaders to act now to mitigate the risk of further unforeseen major geopolitical disruption in the future.

Cybersecurity topped the business risk poll for the fifth year running, but the big story coming out of this year’s study is that geopolitical and macroeconomic uncertainty is the newest and most dynamic risk rising-up the agenda.

John Wood, chief executive of the Chartered Institute of Internal Auditors, said: “Our latest Risk in Focus research highlights the perfect storm of high-impact interlocking risks now being faced by businesses, throwing many into a permanent state of crisis.

“Following hard on the heels of the pandemic, Russia’s invasion of Ukraine has intensified supply chain failures, caused a spike in energy prices and fuelled inflation, exacerbating geopolitical and macroeconomic risks.

“At the same time businesses are grappling with an increasingly weaponised cyber-attack landscape as well as major recruitment and retention challenges.

“Meanwhile, the climate emergency threatens to snowball into the next big crisis unless organisations prepare now for the impacts of climate change, with extreme weather events like the record-breaking heatwave this summer, likely to be the new normal in the future. 

”We urge boards to get a grip on the situation and seek the support of their internal audit functions to help them navigate more risky, uncertain, and volatile times ahead”.