Even as the global recession eases, organizations continue to face a number of critical new threats — in addition to recurring challenges — across all sectors, new research indicates.

Based on a series of in-depth interviews with more than 70 industry leaders and analysts across 14 industrial sectors, Ernst & Young's latest annual Business Risk Report ranks the top business risks for the next 12 months.

"Regulation and compliance has remained one of the most prominent risks since 2008 when these reports began," according to this month's announcement of the findings. "In 2009, this risk was only exceeded by worries about the credit crunch.

"For 2010, regulation and compliance has regained the top spot across the majority of sectors driven principally by the general uncertainty surrounding regulation, which commentators believe is stalling business decision-making," Ernst & Young continues.

The following issues round out the top five business risks for 2010:

• Access to credit — While this risk remains high, opinions on credit availability vary across sectors, with some respondents suggesting that the threat has receded. Automotive leaders cite the absence of liquidity last year as a reminder of why this risk rose to the top spot last year. Credit concerns disrupted automotive supply chains "all the way down to the tooling companies," as one executive puts it. However, rising levels of government debt may have a strong effect on future credit costs.
• Slow recovery or double-dip recession — Although the financial crisis has abated, a fiscal crisis has emerged in its place. There is no guarantee that global growth will be sustained if stimulus packages are withdrawn. The report points to the fallout from Greece, problems in the Eurozone and concerns about sovereign debt as possibly giving rise to a second round of downturns. This risk saw no change from the 2009 report.
• Managing talent — Businesses across the majority of sectors face a number of threats related to human-capital management. "The global war for talent continues to pose a challenge in some sectors, the approaching retirement of the baby boomers looms over others, and the debate over compensation structures is ongoing," according to Ernst & Young's findings. This risk rose three spots from No. 7 in last year's report.
• Emerging markets — "With emerging economies dominating global growth and indebted OECD [Organization for Economic Cooperation and Development] economies expected to grow slowly for years to come, succeeding in emerging markets has become a strategic imperative," the report says. "While emerging markets today seem more stable than developed markets in many respects [...] some executives worried that a backlash against globalization could prove to be a slow-burning phenomenon and that trade barriers could rise to imperil globalization strategies." This risk jumped from No. 12 in the 2009 findings.

Unfortunately, more than half of global business leaders believe their enterprises are not adequately prepared to handle a highly volatile, increasingly complex business environment, according to IBM's recent 2010 Global CEO Study. Based on a survey of 1,500 chief executives from 60 countries and 33 industries worldwide, IBM found that while eight in 10 CEOs expect the global business environment to grow significantly more complex, only 49 percent believe their organizations are equipped to deal with it successfully — the largest leadership challenge identified in IBM's eight years of research.

The CEOs said that a number of factors amplify the complexity of an interconnected world. For instance, CEOs expect revenue from new sources to double over the next five years, and 76 percent foresee the shift of economic power to rapidly developing markets.

"It is clear that across the sectors, organizations need to continue to scan the environment to identify emerging risk issues," Mildred Tan, head of advisory for ASEAN Sub-Area at Ernst & Young, said in a statement. "The scope of risk assessment should be expanded from within the organization through to the value chain of suppliers, customers, business partners and key stakeholders.

"The ability to anticipate threats, respond and continually adapt is as critical a part of the management process as it ever has been," Tan concluded.

To get a clearer picture of the top business risks for each sector in the next 12 months, as well as risks currently below the radar and ways companies can prepare for them, see Ernst & Young's Business Risk Report 2010.

Resources

The Top 10 Risks for Business
Ernst & Young, July 2010

Regulatory Risk Back on Top as Key Threat to Business Performance
Ernst & Young, July 14, 2010

2010 Global CEO Study: Creativity Selected as Most Crucial Factor for Future Success
IBM, May 18, 2010