The top risks that corporate leaders see on the horizon for the coming year include the effect that regulatory changes combined with heightened regulatory scrutiny will have on product and service offerings, global economic conditions that are significantly limiting growth potential, and an unstable political climate in different markets worldwide, according to Executive Perspectives on Top Risks for 2013, a report and survey findings from global consulting firm Protiviti (www.protiviti.com) and the Enterprise Risk Management (ERM) Initiative at North Carolina State University’s Poole College of Management.
The survey sought the views of more than 200 board members and C-level executives across a wide variety of industries about the risks their organizations expect to face in 2013. Participants were asked to rate a list of 20 risk issues on a scale of one to 10, with one indicating “no impact” and 10 indicating “extensive impact.”
According to the survey results, the top 10 risks rated as having the greatest impact in 2013 are:
Of note, while the overall ranking of the regulatory environment was 6.8, the financial services and healthcare sectors both showed significantly higher levels of concern, with rankings of 8.5 and 8.2 respectively.
“An aggressive regulatory environment is here to stay and companies must be prepared or risk being overwhelmed and distracted by it,” said Carol Beaumier, executive vice president with Protiviti. “The executives surveyed clearly understand the commitment and resources required to manage the new regulatory world they do business in, and the significant risks, both financial and otherwise, to a non-compliant approach.” Added Beaumier, “The respondents to our survey also clearly indicated their concern about identifying new areas for growth given the economic conditions in the markets their companies currently serve.”
According to Dr. Mark Beasley, Deloitte Professor of Enterprise Risk Management and director of the ERM Initiative at NC State’s Poole College of Management, the growing number of companies that have operations in foreign countries and more dependency on a global economy has increased the need to anticipate and manage risk around political uncertainties and volatility in global financial markets. “While the largest companies may often seem to have the greatest international exposure to these risks, the reality is that few organizations are immune to the vagaries of the global economic and financial markets and the related impact on demand, rates, credit availability and currencies.”
Additional Survey Highlights
- Overall, most executives rated the current environment as significantly risky, with the majority saying they are likely to make changes or deploy more resources during the next 12 months to manage their respective risks.
- Chief risk officers (CROs) and CFOs were the groups with the highest ratings in terms of their likelihood to make changes.
- The largest organizations rated the greatest number of risks as “Significant Impact” risks reflecting the complexities of their operations.
- The nature of risks varies noticeable across different industries and sizes of organizations, with financial services, healthcare/life sciences, and technology, media, and communications organizations reporting the greatest number of significant risks.
- Not surprisingly, information security breaches and cyber threats that have the ability to disrupt core operations ranked high on the list of challenges, with financial services and technology, media, and communication companies showing the highest levels of concern in this area.
“The results of this survey are a staunch reminder of the need to devote more resources to risk management and risk oversight, including greater investment in internal controls,” said Jim DeLoach, a managing director with Protiviti. “The complexities and risks within the global business environment will only continue to expand, which is why it is imperative that corporate leaders and their boards continue to have the right insights and tools that can help them manage developments and emerging issues surrounding a very dynamic regulatory, economic and political environment.”
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