Companies need to work out what their risks are

When it comes to commercial risk, too many companies spend too much time looking over the fence rather than focusing on their own backyard, Datamine director Paul O'Connor says.

Risks can be categorised as either daily or extreme event risks. Daily risks are those a business is exposed to in the course of normal business operations, such as a customer defaulting on their mortgage. Extreme event risks are those with a low probability of actually occurring, but a high impact if they did, for example, the dollar going over 0.8 to the US dollar, or the current credit crisis.

Identifying and managing these risks could protect a company from possible business collapse. Internal threats are believed to be more common, even though businesses often spend more money protecting themselves and their data from external threats.

"It has been said that a typical US organisation loses 6% of annual revenues to fraud, so the cost is staggering on a macroscopic scale."

"Although no formal research of a similar nature has been conducted in New Zealand, anecdotally we see around the same levels in New Zealand businesses," Mr O'Connor said.

When typical profits of a business might be 5-10%, an additional 6% improvement would drop straight to the bottom line and might double a company's profit.

Appropriate levels of security can not only diminished the risk of data fraud but also build customer trust in the business brand. The embarrassment the UK government suffered, when late last year the Revenue and Customs department lost the details of 25 million citizen, was staggering. Businesses should be moving to prevent a similar fate in the unforgiving media environment.