Businesses prepare for 'new era of public scrutiny' amid spike in investigations, survey finds
FTI Consulting's Resilience Barometer identifies cybersecurity threats, class actions and workplace culture as areas of concern for businesses
The majority of companies are bracing themselves for a full-scale business model shake-up as a result of heightened scrutiny related to business practices and behaviour, according to new research.
FTI Consulting’s 2021 Resilience Barometer revealed 80% of surveyed companies believe they need to fundamentally alter their business models in order to restore competitiveness in the wake of the Covid-19 pandemic, with 97% of respondents actively investing in preparation for future crises, including the incorporation of artificial intelligence and analytics to mitigate risk.
The report, completed based on the views of more than 2,800 decision-makers in large public and private companies across all G-20 countries, found that 83% of respondents said their organisations are being or expect to be investigated in the next 12 months after the pandemic put their business models and practices under the microscope.
The top three investigation worries — identified by a third of respondents as areas of concern — were business conduct and the treatment of customers, sustainability and ESG practices, and relationships with public bodies and government contracts.
The sectors most likely to report experiencing regulatory or political scrutiny over the past 12 months were the services and financial sectors (23% each), the survey found.
“The ability of businesses to handle crises has been a defining factor of their success during the pandemic,” said Caroline Das-Monfrais, senior managing director and global resilience lead at FTI Consulting. “However, Covid-19 has exposed and exacerbated economic and social fault lines — employee wellbeing, talent shortages, treatment of customers, financial crime and cybersecurity all have risen up the corporate agenda, and businesses are responding to protect value and build resilience as they look towards future growth.”
Growing cybersecurity threats were among the concerns raised by surveyed companies looking to embed resilience in their business models, with 78% of respondents having suffered a cyber attack over the past year, with phishing attacks among the most prevalent types (34%).
Edward Westerman, global investigations initiative leader at FTI Consulting, said the changing business landscape will force companies to adopt a “proactive stance” as they continue to deal with the fallout from the pandemic.
“Leveraging new technologies and data and analytics can help companies efficiently manage an ongoing investigation and help mitigate the risk of future crises,” he added.
Companies are also facing what the report calls the ‘great resignation’, as 30% of surveyed companies experienced a shortage of talent and skills during the course of the pandemic. A further 68% reported increased mental health issues in their workforce since the onset of the pandemic, with 29% of respondents now facing extreme pressure to improve corporate culture in the year to come.
Finally, a rise in class actions and mass consumer claims – experienced by 13% of respondents during the pandemic-ridden year – are expected to become far more costly for businesses as these types of claims become more commonplace in the legal market. Seventeen percent of legal costs are expected to be spent on settlements from class actions and other disputes, the survey revealed.
The report coincides with the publication of research by King & Wood Mallesons that found Australian class action law suits had reached an all-time high.
Earlier this year, a study found that US companies spent $2.9bn last year defending class actions, a record that represents 13% of the litigation spending market. More than 25% of the 400 companies surveyed faced at least one Covid-19-related claim in 2020, while some 1600 pandemic-related actions had been filed by the end of April 2021.