There is a marked difference in how companies perceive how challenging the risk environment is based on their size, according to our Risk and Confidence survey.
Bigger companies (defined as £100m+ company turnover) have a lower perception of the current level of risk, with just under 20% perceiving the current risk environment as being extreme or high risk, whereas this rises to 25% or above for smaller companies, according to our Risk and Confidence Survey. Bigger companies also see the risk environment as improving, as this proportion falls markedly to 12% when we look ahead to Autumn 2017, which is interesting considering the current geopolitical and economic environment.
When asked about their business confidence levels in dealing with the risk environment bigger companies only drop 4% when looking ahead, whilst smaller companies predict an 11% dip in confidence, making the gap between how smaller and larger companies confidence in managing the risk environment even wider. This is potentially because bigger companies are more resilient, and generally have better systems, structures, and risk management that can plan for uncertainty and different future scenarios.
However in a world where agility is the key to surviving the continued political and economic uncertainty, smaller companies often have the edge in being able to change and adapt. As businesses strive to grow at home and abroad they now need to be able to move quickly in response to market changes. Our Risk and Confidence Survey shows the trend for businesses currently is set to de-prioritise investment in plant and equipment, as well as in corporate development. This may be a concern, as it may lead to less resilience, less innovation and lower productivity.
For companies to thrive in the current environment nimble needs to become the new normal. Here are some areas that can give companies an edge when it comes to being agile:
- Tech: Technology is seen as an enabler of innovation, as well as a key factor in efficiency, agility, speed of adaptation and ability to compete with competition. 81% of businesses are actively pursuing investment in R&D, including technology enabled products, services or processes. Whilst this is a smart move in making an organisation more nimble, recent global cyber-attacks should make boardrooms consider moving cyber risk up the agenda, as well as benefits tech and cyber can bring.
- New and Emerging markets: After tech, the second most popular lever for moving business forward is the pursuit of topline growth, with 80% of business leaders prioritising it. Opening up or expanding new markets, growing market share or building sales are all at the top of the agenda, with a particular focus on opening up new markets in Asia. However supply chain risk is predicted to grow, especially with the future of the UK’s relationship with the European single market unknown. Organisations need to establish trust with supply chain partners to enable success.
- Talent: Despite 36% of companies exercising caution around hiring, many businesses are casting their net wider in order to secure the best global talent, as well as building flexibility more into their workforce, such as through specific freelancing and the ‘gig economy’. Whilst agile hiring practices have the potential to benefit businesses and staff, organisations still need to be able to access and retain talent, especially in a post-Brexit environment. To counteract the potential negative effects of the ‘gig economy’ companies need to concentrate on building employee culture and loyalty, which is especially important in times of change and uncertainty.
Anthony Williams, Chief Risk Officer
Next in the series: Cyber: How Companies Need to Adapt for the Future