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Corporate leaders' biggest concerns are risks beyond their control: Survey

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Corporate leaders' biggest concerns are risks beyond their control: Survey

The risks corporate leaders are most concerned about this year tend to be those driven by forces outside their organizations' control — generally macroeconomic or strategic in nature — rather than operational risks they feel they can influence, according to a recent private survey.

The survey conducted by the Enterprise Risk Management Initiative of the Poole College of Management of North Carolina State University in Raleigh, N.C., and consultant Protiviti Inc., surveyed 205 board members and corporate executives across a variety of industries about their level of concern over 20 different risks in 2013. Regulatory risks and economic conditions stood out as the group's two top concerns.

“Regulatory risk seems to be front and center in everyone's mind,” said James W. DeLoach, a managing director at Protiviti in Houston. Survey respondents were concerned about changing laws and regulations and also changing levels of regulatory scrutiny and how that creates uncertainty around products and services companies offer, Mr. DeLoach said.

Those concerns also reflect “all the issues around corruption risk and the unprecedented prosecutorial and judicial cooperation across borders,” Mr. DeLoach said.

Economic conditions and their effect on profitability and growth also stood out as a top concern across the survey audience.

“Everyone across the board — whichever way you slice it — (showed) significant concern about economic conditions,” said Mark Beasley, Deloitte professor of enterprise risk management and director of the ERM Initiative in North Carolina State's Poole College of Management.

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“Third on the list but related is concern surrounding political environments, not only nationally but internationally,” Mr. Beasley said.

Mr. DeLoach said, “It's hard to invest when politically you really don't know which direction we're going.”

With regard to operational risks posing lower levels of concern across the entire survey audience, Mr. DeLoach said, “I think what the overriding message was that these executives and directors were telling us was that they're more concerned about what they don't know than what they do know and have some control over.”

The largest organizations — those with more than $10 billion in annual revenue — see a riskier environment than do smaller ones, according to the survey. Large organizations identified eight of the 20 risks as potentially having a significant effect, while small organizations — those with less than $100 million in annual revenue — ranked just two risks as significant.

Of the different sorts of individuals surveyed, chief risk officers tended to view more risks as threatening a significant impact, and also indicated the greatest likelihood that their organization would invest additional resources in risk management in the coming year.

Mr. Beasley said that might suggest the organizations that have created a chief risk officer post are those most likely to understand the risks they face and the need to address them.

“For those organizations that have dedicated someone to play a risk management leadership role — a chief risk officer type — doing so means they have a better handle on the sorts of risks they are facing,” he said.

The report, “Executive Perspectives on Top Risks for 2013,” can be found here.