Coming Distractions

If these eight risks are not on your radar screen, they will be soon.

Like most CFOs, Paul Reilly is not prone to exaggeration. The finance chief at Melville, New York–based Arrow Electronics Inc., Reilly is by nature a pragmatist — a level-headed, by-the-numbers pragmatist. So when he tells you flat out that, “It’s a growing problem; people are not focused on it,” you take note.

What people are not focused on, according to Reilly, is the massive heap of old computers and motherboards piling up in landfills across the planet — the toxic detritus of the Digital Age. It’s a mounting problem — literally — and one that’s only now being addressed by government regulators and corporate officers.

But as big a concern as E-waste is, it is still only a small byte in the larger risk grid confronting business managers these days. Indeed, Reilly’s statement about the looming green peril could just as easily be applied to a host of regulatory red flags and business black holes roiling corporations. And while companies have always faced risks, many finance managers say they can’t remember dealing with so many.

Research seems to back this up. In a recent survey of executives (mostly CFOs) conducted by consultancy Protiviti, half of the respondents reported that the overall risk level for their employers has gone up substantially in the past two years. What’s more, 57 percent of those executives said their employers are not particularly good at identifying risks.

That’s a high percentage, and one that suggests that risk managers are routinely engaged in a corporate version of Wac-A-Mole. Just as one danger is smacked down, another one pops up. And while no single magazine article could ever chart all the hazards facing corporate managers, the eight risks detailed in the following pages cover a wide range of concerns. As such, they involve a number of key company functions, including accounting, finance, and insurance. Finance chiefs may be aware of a couple of the risks, but it’s doubtful any CFO is prepared for all of them.

That’s why we did this story — as a heads-up. Our matrix was simple. The impact of these risks must be felt within the next 12 months, and the risks themselves must be relatively unknown. Of course, relative is a relative term. We’ve omitted obvious big-picture concerns like the aging workforce and global competition.

Instead, we sought out more-tangible, more-discrete risks: from looming regulatory actions to litigation threats to insurance woes. Generally speaking, it’s those sorts of defined dangers that end up bedeviling companies — and agitating even the most even-tempered of CFOs.

Green Laws: No Hazmats Beyond This Point

On July 1, a new law takes effect in the European Union. The directive prohibits the sale of electronic products that contain high levels of six industrial toxins, most notably lead and mercury. The Restriction of Hazardous Substances (RoHS) mandate is intended to keep discarded devices from leaching hazardous materials into soil or groundwater.

The amount of such E-waste is growing at an alarming rate on the Continent — three times the rate of other waste material. The restricted items (especially lead) can be found in a wide range of products, from toasters to computers. That’s what makes RoHS such a bear. “This is a Y2K-type issue [for us],” says Jason Yoder, senior manager of regulatory affairs at network- equipment maker Cisco Systems Inc. “[RoHS] basically changes the way we do business.”

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