Global regulation and legislation have put risk management
high on the corporate agenda and large numbers of medium
sized companies worldwide are putting formal mechanisms
in place. While larger, listed companies are increasingly
obliged by law to keep formal documentation, the Grant
Thornton International Business Owners Survey (IBOS) across
26 countries shows that medium sized businesses are following
this lead.
The survey asked more than 6,900 business owners whether
they had formal, documented mechanisms in place for dealing
with key risks. Dealing with a major IT failure was the
highest category with 63% of businesses having a formal,
written procedure in place. This was followed by loss
or destruction of property (62%) and succession planning
(47%). only around a third of companies, however, had
plans in place for loss of key suppliers or a reputational
or media crisis (see table 1).
Table1:
Formal documented mechanisms
for dealing with issues (% yes)
Across all risk categories, a distinct regional pattern
emerges. North American Free Trade Agreement (NAFTA) businesses
lead the way, European Union (EU) businesses match the
global average while East Asian businesses take a much
less formal approach. For example, the number of companies
with formal plans for IT failure varies from 82% in NAFTA
countries to just 25% in East Asia. For loss or destruction
of property 79% of NAFTA country companies had documented
processes compared with 38% in East Asia (see table 2).
Table 2:
Formal documented
mechanisms for dealing with key events - comparison of
NAFTA and East Asia (% yes)
According to IBOS, the approach to risk differs most between
the US and Japan. While risk management in the US is becoming
more formal, cultural differences in Japan result in a
very different approach (see table 3).
Table 3:
US
and Japanese approaches to formal documented mechanisms
for coping with key events (% yes)
US and Japanese approaches to formal documented mechanisms
for coping with key events (% yes)
Simon Lowe, Head of Risk Management Services, Grant Thornton,
comments:
“The implications of managing risk for companies
have never been more prominent. The IBOS results are
very encouraging in showing that a more rigorous approach
to managing risk is now being taken voluntarily around
the world by many non-listed companies, to whom present
regulation is not directed."
The survey also asked businesses worldwide about what
they thought were the main threats to their businesses.
Increased competition is perceived as the main threat
by 29% of companies globally. This is felt most acutely
in Indonesia (50%), where structural reforms to enhance
the market economy probably account for this nervousness,
India (40%) and Greece (39%). Companies in Hong Kong (47%),
Spain (41%) and Poland (39%) are most concerned about
an economic downturn. New Zealand (21%) is the most concerned
about government regulation and Pakistan (20%) is the
most concerned about the threat of terrorism and war.
