An increase in protectionism and the emergence of disruptive new
business models are among the top risks facing firms over the next
decade, according to Risk 2018: Planning for an unpredictable decade, a
newly-released Economist Intelligence Unit survey and report, sponsored
by BT. The report is based on a survey by the Economist Intelligence
Unit of more than 600 board-level executives, in which respondents were
questioned about their perception of the likelihood and severity of 46
risks, and asked how prepared they believed their organisations would be
to face them.
Responses were aggregated and mapped onto a grid (see below), with the
importance of each risk (a combination of its severity and likelihood)
represented on one axis and levels of preparedness among companies on
the other. The survey highlighted 12 risks as ”tier one” in nature.
They are of particular concern because they combined high levels of
severity and likelihood with relatively low levels of preparedness. The
risks identified as “tier two” were classed as such owing to either
the low perceived severity and impact of the risk, or because of very
high levels of preparedness. The 12 “tier one” risks are:
? Retrenchment of globalisation/increase in protectionism
? Oil price shock
? Asset price collapse
? Emergence of disruptive business model
? International terrorism
? Unexpected regulatory change
? Global recession
? Instability in the Middle East
? Increased competition from emerging market companies
? Talent shortages
? Climate change
? Increased industrial pollution
Given these threats, the report goes on to examine the various ways in
which companies can manage potential risks and plan for the future.
“Faced with a highly uncertain business environment, executives are
seeking guidance on how major trends and risks might affect their
business over the next decade,” says Rob Mitchell, editor of the report.
“By comparing perceived levels of severity and likelihood with levels of
preparedness for a diverse set of risks, our survey illustrates a number
of areas where risk managers and executives might need to sharpen their
focus over the next ten years.”
François Barrault, chief executive of BT Global Services said: “This
report highlights the sheer breadth of risks that are now primary
boardroom concerns. Globalisation is driving risk management to become
an issue of strategic importance. Companies that integrate their risk
planning and infrastructures will be more resilient and will reap the
rewards in this more complex trading environment.”
Other key findings of the report include:
? Climate change is not seen as a particularly severe risk, or one
that is likely to cause an impact over the next ten years. Despite
widespread media and governmental attention on climate change,
respondents do not expect environmental risks to be particularly severe
over the coming decade. However, the fact that the majority of
respondents exhibited a low level of preparation towards climate change
means that it has been classified as a “tier one” risk.
? Emerging markets are seen as both a threat and an opportunity.
Respondents expect increased competition from emerging markets to be a
major worry over the coming decade, but they also see many of these
countries as a key source of growth. The majority of those surveyed
named China as the country where they expect to see the biggest increase
in revenue contribution, followed by Europe (including Eastern Europe)
and Asia-Pacific (excluding India and China).
? Scenario planning is a widely used tool to consider future risks.
As companies look to an uncertain and unpredictable future, more and
more are using techniques such as scenario planning to help them map out
the road ahead. Among our survey respondents, 26% say that they use
scenario planning on a regular basis and 41% say that they use it on an
ad hoc basis. Out of the remainder, 29% say that they have plans to use
the technique in the future.
? Risk management will become a more strategic activity. The trend
for risk management to be considered a strategic activity is expected to
continue into the next decade, with two-thirds of respondents saying
this area will become more important as a strategic tool, and 58%
expecting it to command more attention from the boardroom.
Risk 2018: Planning for an unpredictable decade is available free to
download at: www.eiu.com/sponsor/BT/risk201
