Only 42% of respondents to MT’s annual Risky Business Survey, conducted in association with Zurich Insurance, claimed to have a good understanding of the immediate risks to their business. The worrying part: that leaves 58% admitting they don’t.
Of that total, 44% cited a ‘fair understanding’. The trouble is, when it comes to risk, a ‘fair’ understanding is actually rather meaningless. ‘That’s like being asked if you’re married and you say 'partially',’ says Jim Wilkes, senior technical underwriter at Zurich. ‘Either you are or you aren’t. If you don’t fully understand risk then you really don’t understand it at all.’
You don’t have to be going over Niagara Falls in a barrel to see the problem here: calculated risks are the lifeblood of business, even at the best of times, and companies won’t get anywhere if they don’t have a decent handle on the challenges in the first place. Add in a macro-economic climate as fraught with peril as any in recent memory, and you need managers to know those risks like the back of their hand (kid gloves to be worn as appropriate).
Indeed, it becomes more understandable when companies show they at least know what’s out there and then opt to exercise caution. 46% of survey respondents said the state of the UK economy was the biggest risk to their company in the next 12 months. Given the current conditions, taking an outlandish punt may well be the last thing a business would do.
There were other expected findings: asked for most important immediate risks, 23% of respondents cited launching new product ranges, closely followed by capital investment and lack of available skills. But given the aforementioned fears over the UK economy, it’s noteworthy that only 7% considered entering emerging markets to be a risk. This suggests one of two things: either these UK managers are dab hands at heading to China and Africa already, or they haven’t got round to it yet. If it’s the latter, then it seems that risk is not the only current business issue that we haven’t got a proper perspective on. With the outlook appearing risky here, what better time could there be to start casting the net more widely?
There are some positives. A respectable 38% of respondents said they felt more optimistic about their business’s chances than they did 12 months ago, 9% strongly so. Such optimism is crucial if UK plc is to get cranking at full speed again. And it seems the message of corporate governance has sunk in: directors reported being more likely to take risks than anyone else in their company, which suggests that responsibility for risk is now sitting at an appropriate level within organizations.
No scope for any more Bob Diamond-style ‘I didn’t know what was going on below me,’ gaffes then…