Financial executives at the world’s largest companies expect the severity of their most prevalent business risks to remain constant or intensify through 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 organizations’ 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.
Available online at www.protectingvalue.com, the study findings include the perspectives of more than 500 financial executives in North America and Europe – including CFOs and treasurers – who work for companies with at least US$500 million or more in annual revenue.
Among the key finding of the study:
• 62 percent of financial executives expect risk from competition to increase through 2009, while only 4 percent expect it to decrease.
• Nearly one-quarter of financial executives expect supply chain risk to increase through 2009, while only 8 percent 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.
• 56 percent of financial executives anticipate that, in the years ahead, finding enough time, money and people will be their biggest challenge to implementing a strong risk management program.
• More than one-third of financial executives expect a significant challenge in getting senior management to make risk management a top priority.
“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 organizations proactively identify and address the threats they face today, while never losing sight of emerging risk on the horizon.”
More than half of the financial executives warn that a disruption to their top revenue driver can mean a loss of competitiveness, which can translate into both a loss of market share and reduction in their company’s valuation. Additionally, almost one-quarter of executives report such a disruption could result in employee layoffs and/or an adverse impact on the local economy. Other top potential consequences executives cite include having to exit a line of business, undergo leadership changes, witness their company’s credit rating downgraded, or face regulatory scrutiny or legal action.
“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,” Bosman said. “Organizations that may be tempted to shortchange their risk management efforts face potential consequences ranging from the severe – a loss of competitiveness – to the catastrophic – having to cease operations altogether.”
