FM Global reveals the findings of its latest study "Managing business risk through 2009 and beyond"
Financial executives at the world’s largest companies expect the severity of their most prevalent business risks to remain constant or to intensify through to 2009, according to the “Managing Business Risk Through 2009 and Beyond” study commissioned by commercial and industrial property insurer FM Global.
Executives identified the top three biggest threats to their organisations’ revenue as competition, followed closely by supply chain disruption and property-related risks. The study also reveals a range of emerging risks that, while not among their primary concerns today, executives say could pose challenges in the years ahead.
“This year’s study results are a forceful reminder that managing business risk is a continuous, dynamic process, and not something a company can afford to be complacent about,” said Ruud Bosman, executive vice president at FM Global. “Successful organisations proactively identify and address the threats they face today, while never losing sight of emerging risk on the horizon.”
The study findings include the perspectives of more than 500 financial executives in North America and Europe who work for companies with US$500m+ in annual revenue.
Key findings include:
• Sixty-two percent of financial executives expect risk from competition to increase through to 2009; only 4% expect it to decrease.
• Nearly one-quarter of financial executives expect supply chain risk to increase through to 2009; only 8% expect it to decrease.
• The top five emerging threats for corporations include changes in competition, government and regulatory developments, pricing volatility, variable client demand and political threats.
• Fifty-six percent of financial executives anticipate that finding enough time, money and people will be their biggest challenge to implementing a strong risk management programme.
• More than one-third of financial executives expect a significant challenge in getting senior management to make risk management a top priority.
While financial executives in Europe and North America share many of the same concerns about the state of business risk, there were some regional variations. For example, when asked to list the consequences of a disruption to their top revenue driver, UK based financial executives routinely express more pessimism than their counterparts elsewhere: 62% of UK executives polled worry about a loss of competitiveness compared with 51% of all other respondents.
Twenty-four percent of UK based respondents say a disruption can lead to exiting a line of business or ceasing operations all together, and 21% say it can lead to leadership changes. By contrast, only 10% of all financial executives worry about exiting a line of business or ceasing operations as a result of a major business disruption, and only 8% worry about leadership changes.
“As the financial executives interviewed for this study warn, the price of a major business disruption can far outweigh the cost of effective risk management,” says Bosman. “Organisations that may be tempted to short-change their risk management efforts face potential consequences ranging from the severe - a loss of competitiveness - to the catastrophic - having to cease operations altogether.”
The “Managing Business Risk Through 2009 and Beyond” study is available online at www.protectingvalue.com