There was plenty of uncertainty this year, from the Brexit vote to the Presidential election, but what are CFOs most worried about ahead of 2017?
The potential for global developments to unsettle economic conditions and restrict growth opportunities both here and overseas is the top risk cited by executives in a survey from the consulting firm Protiviti and North Carolina State University’s Poole College of Management. Seventy-two percent of respondents rated “uncertain economic conditions” as potentially having a significant impact on their companies over the next 12 months.
The survey polled 735 board members and executives worldwide about risk issues that will likely have an impact on their companies next year. Executives were asked to rate 30 risk issues from 1 to 10 based on how much impact they expect them to have on their companies. The survey was conducted online in the fall of 2016.
Regulatory change and heightened regulatory scrutiny was the second most-pressing risk, down from the top spot in each of the prior four years. Sixty-six percent of respondents cited regulatory change as having the potential for serious impact in 2017.
“Our survey results support a shift we’ve seen in the focus of board members and C-suite executives towards risks associated with international and domestic economic conditions,” said Mark Beasley, Deloitte professor of enterprise risk management at Poole College.
Managing cyberthreats, disruptive innovations, and privacy and identity protections rounded out the top five concerns.
Executives’ Top 10 Risk Issues for 2017
Executives rated these risk issues based on a 10-point scale with 10 representing the risk issue will have a significant impact on the organization.
The survey also found that perceived overall risk levels seem to be increasing. Global business was rated as being riskier than in the prior two years. Respondents in the U.S. said risk levels were about the same, while respondents in other parts of the world signaled much greater concern.
“Executives are concerned about their companies’ ability to keep pace with the rapid speed of change,” said Patrick Scott, Protiviti’s executive vice president of industry groups. “While the effects may vary across industry groups in terms of different risk profiles, our study shows that no industry is immune to future uncertainty in a changing world.”
CFOs and CEOs appear to be more worried than the average C-level executive. All 30 risk issues graded by top finance and executive officers received either a “potential impact” rating of 4.5 to 5.9 on the ten-point scale, or a “significant impact” rating of 6.0 and above. None of the issues received the “less significant impact” rating of 4.4 and below.
Surprisingly, board members seemed much more optimistic than other survey takers, evaluating 18 of the 30 risk issues at the lowest impact level.
The risk scores for all of the top 10 risk issues were higher than last year.
Although perceived risk levels appear to be rising, organizations say they are not planning to increase investments in their company’s risk management capabilities. In fact, executives said they are less interested in enhancing oversight processes than in the prior two years. While that may seem paradoxical, the report suggests companies could be tightening purse strings in an uncertain economic climate or are satisfied with the prior years’ investments.