Market disruption is the highest risk impact for professional services
Vertical integration of supply chains, a rise in cyber simulations, enhanced force majeure provisions in contracts and centralised regulatory intelligence hubs are just some of the strategies businesses are introducing to mitigate the biggest threats of today, according to Clyde & Co’s Corporate Risk Radar.
The first instalment of this annual report examined the views of more than 400 business leaders globally, revealing which risks are the biggest threats to their organisations. In this second instalment, the firm’s global network of partners share insights about how clients are acting to manage geopolitical, economic, regulatory, cyber and AI risk.
Geopolitical upheaval
59% of business leaders identified geopolitical upheaval as a key concern, with management of supply chains critical. In the oil, gas and agricultural sectors, many are now increasing vertical integration to manage third-party exposure. Multinationals are also ‘friend-shoring’ to concentrate suppliers in more politically aligned jurisdictions, re-introducing more in-person meetings to scrutinise operations and ensuring more paper trails to track costs.
Elizabeth Evans, partner at Clyde & Co, New York, has seen firms even expanding operations: “It’s about making sure there are boots on the ground, or acquisition of supply chains, so that if one jurisdiction becomes more volatile, they can leverage resources in another.” She adds that, in the aviation industry, as a result of new sanctions and tariffs there is a greater focus on paper trails. “We have seen a push for separate invoices to track costs, especially when exemptions are involved, to help manage who carries the risk – supplier or customer.”
Managing regulatory risk
64% of leaders said rising regulatory and compliance obligations are materially impacting their growth plans. In response, businesses – notably in insurance – are establishing centralised regulatory intelligence hubs to map obligations. Others are holding simulations of playbooks to identify what plans need reinforcements and recruiting more sector specialists to interpret analyses. In turn, the latter has placed greater focus on the importance of HR and chief people offices.
Sam Tate, partner and global head of regulatory & investigations at Clyde & Co, London, said: “New regulations, like the UK’s Failure to Prevent Fraud (FTPF) offence, continue to impact multinationals, and companies are continually seeking technology solutions to implement regulatory programmes effectively.”
Eva-Maria Barbosa, partner & chair of the Global Corporate & Advisory Group at Clyde & Co, Munich, said: “Regulatory rules often lag technological advancement. Organisations are adapting business structures to fit regulatory requirements despite this lag, requiring sector specialists to interpret analyses and ensure compliance is adhered to.”
Turning economic risk into opportunity
Nearly half (48%) of business leaders said they are anticipating more contractual disputes, 56% and 50%, respectively, cited inflation and interest rate risks as high impact threats and 68% identified rising labour costs as a concern. The businesses that are thriving in this environment are embracing flexible governance structures and more sophisticated scenario planning, as well as investing in upfront training and talent to mitigate cyber risk.
Strong companies are using this as a catalyst to reshape their operating models, embedding inflation clauses and enhanced force majeure provisions directly into their contracts.
James Roberts, partner at Clyde & Co, London, said: “Volatility is a feature, not a bug. The more resilient companies will redesign workforces with automation, flexible resourcing and agile structures. This means teams who can look at the detail of potential risk are a key part of the upfront contracting process, rather than a second stage.”
The continuously changing cyber threat
67% of respondents said cybersecurity breaches and data loss were high impact risks facing their organisations this year, followed by data storage and capacity issues (49%) and IT disruption (47%). In response, businesses are embedding cybersecurity into organisational culture and recruiting more cyber specialists.
Olivia Darlington, partner, at Clyde & Co, Dubai, said there has been a sharp increase in ransomware attacks targeting the Middle East in the last year. “Many organisations in the region are still in the educational phase, but they are increasing cybersecurity protocols, controls and regulations in their risk mitigation strategies and running cyber simulations. Many laws around data privacy are evolving, often on a daily basis.”
How AI is reshaping the workplace
The debate around the adoption and use of AI in the workplace has shifted, with the introduction of new agentic AI tools and the need for rapid training and investment to equip teams.
Ben Knowles, partner & chair of the Global Arbitration Group at Clyde & Co, London, said: “Leadership will provide the tools, but each department, including legal, are expected to figure out how to use AI. The focus is on efficiency over innovation, and this efficiency drive is probably trumping concerns about risks. Organisations must introduce guidance, guardrails and frameworks as they rollout any AI tool in the workplace.”