OVERREGULATION, SKILLS SHORTAGES and low-cost competition far outstrip more high-profile risks such as terrorism, climate change and pandemics in the eyes of CEOs, according to a worldwide survey.
The annual PriceWaterhouseCoopers (PwC) Global CEO survey said it wasn’t surprising to find the heads of companies were more focused on “near-term” threats, but it was unexpected to see major “external” events ranked so low.
Terrorism is seen as a key risk by just 50 per cent of respondents, global warming by 40 per cent and pandemics by 37 per cent, compared to overregulation, which 73 per cent of CEOs were either “somewhat” or “extremely” concerned about. This concern was followed closely by availability of key skills (72 per cent) and low-cost competition (66 per cent).
PwC said this wasn’t a case of CEOs “burying their heads in the sand”, but a reflection of the sentiment that these global risks are just too big for any one company to deal with on its own.
Dante Peel, a partner in the risk advisory service of PwC, said a growing number were factoring these issues into their risk strategies, but many big companies need to do more to analyse the impact of some of the decisions they are making.
“For example, when we are investing in a long-dated asset that may have a 30-year life, the reality of life is that there are a number of uncertainties around that decision [such as] climate change,” he said.
“So they really need to think through [these issues] in a more rigorous fashion, to make sure we are making the right decision. They are starting to analyse in more depth some of these risk issues, rather than take … the intuitive approach.”
The survey found about 12 per cent of the sample are heavily involved in collaborations with other companies and public sector organisations to reduce external threats.
“With a further 64 per cent of CEOs citing some limited involvement in such collaborations and initiatives, we believe that we are beginning to see a trend that merits further analysis in subsequent studies.”
In line with the greater importance placed on immediate risks to profitability, almost a quarter of the respondents said the legacy they would like to leave is of a company that nurtures their employees’ talents and skills.
However, PwC said many also recognise the importance of being “good corporate citizens”, which they view as an aid to attracting global talent.
“The … global winners of tomorrow are those that can … learn to operate in a world now subject to far more influences from a wider array of sources than ever before,” the report said.
This raised new risks, including working within diverse cultures, nurturing management talent, and responding to competition from new global players.