Rising competition, energy prices and government policies also among chief external risks
Economic uncertainty in coming years is the number one external threat to business, followed by rising competition and uncertainty about government regulations and policies, according to a PwC survey of executives.
More than three quarters (76.3 percent) of all executives see economic uncertainty as their chief external risk, making it the most cited concern in a survey of more than 1,000 executives worldwide and PwC interviews with senior executives of Fortune 500 companies.
The concern is most noticeable in the financial services industry, where it is mentioned by 83.1 percent of executives. It is least cited by health services executives, at 63 percent.
Rising competition, mainly as a result of globalization and less expensive labor in developing economies, is the second-most common external risk, cited by 62.8 percent of all executives.
The concern is most acute in the retail and consumer sectors, being mentioned by 77.2 percent of executives, and least cited in the industrial products sector, at 54.6 percent.
Government policy, particularly ahead of the November US elections, is mentioned as a critical external risk by 62.1 percent of all executives. Around 77 percent of executives in the financial services sector see it as a key risk, compared with 44.9 percent in the technology and entertainment sector.
‘This period of heightened volatility, which started with the 2008–2009 financial crisis, shows no sign of ending soon,’ PwC notes in summarizing the findings of the report.
‘The eurozone debt crisis continues to cast a shadow over the world economy, and levels of consumer and corporate indebtedness remain well above historical averages in many countries. At the same time, the US is grappling with an appropriate response to the expiration of the Bush tax cuts at year-end 2012 and mandated budget cuts in 2013.’
The survey’s list of worst-managed external risks is topped by geopolitical risks, which 59.8 percent of those surveyed say suffer from ‘very poor’ risk management or are neither managed particularly poorly or particularly well, according to the PwC study.
Next on the list is disruptive technology, mentioned by 57.1 percent, talent and labor at 55.4 percent, international trade and payments at 52 percent, energy and commodities costs at 59.3 percent, and crime and terrorism at 49.1 percent.
In terms of the severity, likelihood and sheer number of external risks over the next 12 to 18 months, the financial services sector is most exposed, according to the report.
‘Financial services leads all other sectors in the number of external threats expected to be at high-risk levels over the next 18 months, as banking, insurance and capital markets firms seek to address economic and financial market volatility as well as an ongoing regulatory and political backlash against the financial sector,’ the report concludes.
