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Risk Management

Rising Risk on the Radar for 2017

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December 20, 2016

Protiviti Risk Survey: Risk-on in 2017 as corporates gird for the unexpected.

Financial RiskCorporate board members and top executives view risks rising across the board in 2017, prompted by unanticipated political events and the pace of change brought on by disruptive technologies. These risk may outpace organizations’ ability to compete or manage them appropriately. But meeting these risks emphasize the key role treasury can play in identifying and mitigating them.

Consultancy Protiviti joined with North Carolina State University’s ERM initiative to conduct the survey of 735 board members and top executives across a wide range of industries, including CEOs and CFOs. Most respondents were from the US (55%), while 20.5% were from the Asia-Pacific region and 19.5% from Europe. Participants were asked to rate 30 risk issues.

Dr. Mark Beasley, Deloitte professor of enterprise risk management at the Poole College of Management and director of the ERM initiative, said the most notable aspect of the fifth annual survey was that indicators of overall risk went up in the top 10 of 30 risk categories in the survey, suggesting significant uncertainty in the marketplace. The top four risk categories were: economic conditions restricting growth opportunities; increasing regulatory changes and scrutiny; organizations not sufficiently prepared to handle cyber threats; and the speed of disruptive changes that outpace companies’ ability to compete.

The perception of risk varied by geography, according to the survey. US respondents indicated risk in the global business environment was about the same as last year, but those from Asia/Pacific and Europe saw elevated risk over the year before. James DeLoach, managing director at Protiviti, noted that Japan’s and China’s persistent economic woes were likely to have raised concerns among respondents in Asia while Brexit and potentially more anti-European Union votes next year in other European countries have elevated the perception of risk in those jurisdictions.

“The US has been somewhat ‘insulated,’ if that’s the correct word, but with President-Elect Trump, all heads will turn to assess what his policies will be, since details have yet to be articulated,” Mr. DeLoach said.

The survey also pointed out that perceptions of risk varied by respondents’ executive positions. Members of boards of directors as well as CEOs actually perceived less risk in the year ahead compared to last year or the year before. CFOs, meanwhile, saw risk increasing somewhat compared to last year, although down noticeably from 2015. Chief risk officers, however, have seen risk steadily increase. The biggest concerns of CFOs, whose bidding treasury executives largely seek to do, were economic conditions restricting corporate growth and sustained low fixed rates impacting the company’s operations.

Mr. DeLoach said the disruptive changes in financial markets, whether negative interest rates in Europe or Trump’s tariff threats, are particularly unnerving for corporate finance executives.

Treasury executives have access to cash flow and other data providing early insight into such changes and a basis to develop strategies to mitigate related risks. “Treasury is sitting on a goldmine of information that could help other parts of the business,” Mr. DeLoach said.

 

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