Last year financial, liquidity and insolvency risk ranked well outside the top five risks to businesses, when cybersecurity, changes in laws and regulations, and digital disruption were the top concerns. However, research by the Chartered Institute of Internal Auditors ranked it as the number one risk, up from ninth place.

Other top risks exacerbated by concerns about the economic outlook included market changes, competition and changing consumer behaviour, macroeconomic and geopolitical uncertainty, talent management and retention and supply chains. This means that businesses continue to face the ‘perfect storm’ of interconnected risks.

Chief audit executives reported that the top five risks, which have been exacerbated by economic uncertainty, were:

1. financial, liquidity and insolvency (62%)
2. market changes, competition and changing consumer behaviour (60%)
3. macroeconomic and geopolitical uncertainty (50%)
4. human capital, diversity, talent management and retention (48%)
5. supply chain, outsourcing and third-party risks (43%)

The results of the poll of nearly 800 senior internal auditors highlighted the need for business leaders to work with their internal audit functions to ensure they are prepared for the unexpected.

This should include reviewing business continuity and crisis management plans to ensure they are fit for the economic unknowns that could arise in the months ahead, as well as undertaking economic simulation exercises, along with financial stress testing, based on a range of different economic scenarios.

Anne Kiem OBE, chief executive of the Chartered Institute of Internal Auditors said: ‘This poll demonstrates that ongoing economic uncertainty means that businesses continue to face strong headwinds with financial, liquidity and insolvency concerns now front and centre.

‘This research underlines the need for boards to collaborate with their internal audit functions to ensure they have identified, managed, and mitigated the myriad of business-critical risks they now face. Internal audit has an important role to play in supporting the board in this.’

The Chartered IIA is also calling on the government to ensure there are no further delays to plans to reform the audit and corporate governance framework.

It is urging ministers to publish the statutory instruments for audit and assurance policies and resilience statements, as well as ensuring there is a commitment in the first King’s Speech to an Audit Reform Bill.

‘The more risky, uncertain, and volatile environment businesses are now operating in, means that planned reform to the audit and corporate governance framework is more urgent than ever,’ said Kiem.

‘We urge the government to publish the statutory instruments for resilience statements and audit and assurance policies without further delay, as well as ensure there is a commitment to an Audit Reform Bill in the King’s Speech. These reforms are vital to enhancing the resilience of our economy.’