New Zealand business leaders must prepare for the ‘new normal’ of cascading risks

New Zealand business leaders must prepare for the ‘new normal’ of cascading risks

As New Zealand’s risk landscape becomes increasingly complex, business leaders must look beyond isolated risk factors and prepare for a ‘domino effect’ of multiple risks.

This is the core message from the BDO New Zealand Risk Landscape Report 2024, entitled ‘Countering Cascading Risks: Navigating the New Normal.’ The report draws on insights from the eighth annual BDO Global Risk Landscape Report and contextualises them for the local market, as well as sharing practical tips for how businesses can approach and address these key risks.
COVID-19 and Cyclone Gabrielle reveal business exposure to cascading risks
“The last few years have shown us how one event can trigger a domino effect of other risks,” explains Tarunesh Singh, BDO Risk Advisory National Leader.

“Four years on from the start of the COVID-19 outbreak, many local businesses are still feeling the impacts of the loss of demand and supply chain disruptions that were triggered by the pandemic and the domino effect of workforce cuts and economic loss that followed. Meanwhile, a year on from Cyclone Gabrielle and the Auckland floods, the immediate physical damage caused by these events has in some cases been repaired, but the flow on effect for businesses from these disasters may be felt for years to come. What we’ve seen from the past few years is that what starts as a single event can swiftly spiral into a chain reaction of challenges.”
Embracing a proactive risk mindset
The ‘new normal’ risk landscape demands a mindset shift in how businesses approach risk management. The report recommends business leaders take a broad view of their entire risk profile, rather than focusing solely on isolated risks, and consider how events and threats can intersect and trigger each other, immediately and in the future.

The particular challenge for businesses is when an initial risk absorbs their risk management capacity over an extended period, they concurrently need to be thinking about the potential flow-on impacts and preparing for these as best as they can.

“The big challenge ahead for New Zealand business leaders, who in many instances are still recovering from the events of recent years, is to be prepared for not only immediate risks, but also the cascade of risks that can be triggered from those events. As such, risk needs to be on the agenda at the highest levels in an organisation. In 2024, a broad and strategic risk management approach that links risk management to business objectives may be more fit for purpose than a narrow prevention-and-compliance approach,” Tarunesh states.
Biggest risks include cyber security breaches, an economic slowdown, and environmental concerns
Globally, C-suite executives say their companies are least prepared for several key risks: cyber attacks and computer crime, economic slowdown or a slow recovery, and environmental risk. The BDO New Zealand Risk Landscape Report contextualises these risks for the local market in the following categories:

- Economic slowdown and a slow recovery
High interest rates, inflation, and political instability are identified as drivers of economic slowdown and a slow recovery. To address this, the report recommends reviewing business strategies in line with current and predicted economic conditions.
- Cyber security and fraud
As artificial intelligence (AI) grows in size and scope, businesses must be aware of the ways disruptive technologies can amplify cyber crime and cyber fraud risks. The report recommends businesses proactively prepare for a breach or fraud event.
- Climate and the environment
Scientific modelling shows extreme weather events will continue to become more frequent and severe into the future. To prepare, the report suggests scenario-building by identifying potential risks, assessing the likelihood and impact of those risks, and developing mitigation plans.
Seeking assistance to reduce risk exposure
Tarunesh explains that while risks can seem unlikely, experience has taught us that they can become reality.

The most important thing business leaders and owners can do to navigate the cascading risk landscape is understand your own risk profile and what you can do now to reduce your exposure to risks. However, you don’t know what you don’t know, and best intentions can’t always defend against every combination of risk. By seeking external support, whether that’s from your professional network or trusted adviser, you’ll be better placed to navigate this new reality of cascading risks.”
About the New Zealand Risk Landscape Report 2024
The New Zealand Risk Landscape Report 2024 draws on the 2023 BDO Global Risk Landscape Report, which is based on a survey of 500 C-suite executives across Europe, MEA, APAC and the Americas. The New Zealand Risk Landscape Report contextualises this global report for our local New Zealand market, based on our interactions with clients.

To view the report as well as a video interview with Tarunesh, click here.