By Daniel Hunter
High taxation is now seen as the number one threat to global business according to the third Lloyd’s Risk Index.
The survey of more than 500 of the world’s most senior business leaders also suggests executives are focusing on more pressing problems including cyber-attacks and increased material costs, rather than longer-term strategic decisions.
First published in 2009, this year’s Risk Index — run in conjunction with Ipsos MORI — provides an in-depth picture of how global business leaders prioritise and prepare for major risks:
- High taxation is identified as the biggest risk faced by business leaders after prolonged public and political exposure and debate. It has soared up the Risk Index ranking from 13th to 1st place in the last two years.
- Cyber security now sits squarely towards the top of the agenda for boards around the world with cyber risk1 moving from 12th to 3rd place in the index. Business leaders have woken up to the importance of cyber security following a series of high profile incidents since 2011.
- Loss of customers has slipped to 2nd place, down from the number one risk two years ago as businesses struggle with the continued effects of economic turbulence.
In response to the findings, Lloyd’s Chief Executive, Richard Ward, is warning that focusing on near-term issues at the expense of longer-term strategic decision making can leave organisations over exposed to future business challenges.
“With business tax in the spotlight and rising up the political agenda, executives are understandably concerned. Yet the danger is that an emphasis on near-term, operational issues comes at the expense of significant, strategic decisions that have previously exercised business leaders," Ward said.
“With the timetable for global economic recovery likely to be much longer than we hoped, a focus on long-term sustainability and effective risk management should be a priority for boards across the world.”
The Index reveals how the relationship between preparedness and prioritisation of risks has changed in recent years, as well as the diverging approaches taken by large and smaller companies:
Over the last 5 years, business leaders have developed a more sophisticated and proportionate approach to risk management. In 2013, across the 50 key risks, those given a higher priority score are also given a higher preparedness score, while risks ranked lower in priority are ranked lower in preparedness.
In 2013, company size is the biggest differentiator in risk perception and management. In 2009, large and small companies had a more comparable view on priority and preparedness across all risks than in 2013. Now, smaller companies give all risks lower priority (10% below average) compared to larger companies (8% above average).
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