Risk management in spotlight amid credit crunch aftershocks

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2009 Ernst & Young Business Risk Report

Business is increasing its focus on a wide variety of risks as global economic conditions worsen in the aftermath of the credit crunch, according to the “2009 Ernst & Young Business Risk Report”. The annual top-ten ranking, published in conjunction with strategy consultancy Oxford Analytica, reveals that companies around the world are realizing the importance of thorough and robust risk management across related risk areas.
Report respondents, including more than 100 leading global sector analysts, ranked credit crunch aftershocks and global recession as some of the most important business risks for 2009, displacing regulation and compliance from the last year’s top spot. Yet the survey also revealed that the shifting balance of power between established and emerging markets and players, redundant business models, and raised concerns over reputational risks have caused a significant re-weighting in risks since last year.
“There has never been a more appropriate time to talk about business risk,” said John Murphy, Global Managing Partner – Markets, for Ernst & Young. “Volatility has increased, and so has business risk.
“The extent to which executives believe that these risks are working in unison on an unprecedented scale to threaten corporate viability, is really striking,” he said. “Many of the economic perils that companies are currently facing are linked, including credit scarcity, compliance and regulation, deepening recession, cost-cutting and reputational risk.”
New entrants are entering many new industries from different directions and for different reasons, including technical advancements and changes in local regulations and laws. As media, telecoms and technology industries converge, banking, insurance and asset management companies compete for the same customer, and emerging markets become more competitive, some sectors are seeing a swell of new competitors eager to grab market share and challenging industry stalwarts.
For some companies, technological change and industry transitions are making long-established business models obsolete, forcing them to reinvent their corporate strategies and structures. This trend has gathered steam, and the risk it presents is new to the list this year, landing it in 9th place.