Medium sized companies worldwide adopt big business approach to risk

The US leads the way; Japan takes less formal approach

Global regulation and legislation have put risk management high on the corporate agenda and large numbers of medium sized companies worldwide are putting formal mechanisms in place. While larger, listed companies are increasingly obliged by law to keep formal documentation, the Grant Thornton International Business Owners Survey (IBOS) across 26 countries shows that medium sized businesses are following this lead.

The survey asked more than 6,900 business owners whether they had formal, documented mechanisms in place for dealing with key risks. Dealing with a major IT failure was the highest category with 63% of businesses having a formal, written procedure in place. This was followed by loss or destruction of property (62%) and succession planning (47%). Only around a third of companies, however, had plans in place for loss of key suppliers or a reputational or media crisis (see table 1).

Table 1:

Across all risk categories, a distinct regional pattern emerges. North American Free Trade Agreement (NAFTA) businesses lead the way, European Union (EU) businesses match the global average while East Asian businesses take a much less formal approach. For example, the number of companies with formal plans for IT failure varies from 82% in NAFTA countries to just 25% in East Asia. For loss or destruction of property 79% of NAFTA country companies had documented processes compared with 38% in East Asia (see table 2).

Table 2:

According to IBOS, the approach to risk differs most between the US and Japan. While risk management in the US is becoming more formal, cultural differences in Japan result in a very different approach (see table 3).

Table 3:

Simon Lowe, Head of Risk Management Services, Grant Thornton, comments:

"The implications of managing risk for companies have never been more prominent. The IBOS results are very encouraging in showing that a more rigorous approach to managing risk is now being taken voluntarily around the world by many non-listed companies, to whom present regulation is not directed."

The survey also asked businesses worldwide about what they thought were the main threats to their businesses. Increased competition is perceived as the main threat by 29% of companies globally. This is felt most acutely in Indonesia (50%), where structural reforms to enhance the market economy probably account for this nervousness, India (40%) and Greece (39%). Companies in Hong Kong (47%), Spain (41%) and Poland (39%) are most concerned about an economic downturn. New Zealand (21%) is the most concerned about government regulation and Pakistan (20%) is the most concerned about the threat of terrorism and war.

Notes to editors

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