Corporate risk at peak levels stymies decisions, survey finds

The majority (67%) of business leaders worldwide say the risk landscape has become “many times” more complex in just three years, rising to its highest level in 12 years, according to Clyde & Co’s annual Corporate Risk Radar. Today’s business leaders are facing “one of the riskiest environments in a generation”, the law firm said, with the next two to three years also a tough outlook. Publishing the results of a survey with 225 c-suite executives and general counsels worldwide in partnership with Winmark Global, Clyde & Co said companies are facing an unprecedented polycrisis of risk led by increasing economic volatility, geopolitical unrest and the disruptive forces of AI. “This is having a dramatic impact on corporate decision making,” Clyde & Co said. “Risk caution is estimated to be costing as much as 5% of corporate revenues,” and more than a quarter of respondents say risk perception has stymied bold decision making. Economic risk strengthened its number one ranking in the poll, named by 82% of business leaders as a high-impact risk for their business, up from 74% in last year’s survey. People challenges – attracting and retaining staff and talent management – and increased regulation and compliance burden were both cited as high-impact risks for 58% of firms. Further, 43% said increasing global regulations are a growing threat to their business. Concerns about all top ten risks, with the exception of climate, increased in this year’s survey. Operational challenges, including restructuring and implementing new business models or technology, recorded the highest rise in the rankings, cited by 42% of businesses this year from 29% and jumping from ninth place to sixth. Climate risk was named by 31% of respondents as a high-impact risk, down from 37% in last year’s survey to put it in ninth place, down from sixth. Clyde & Co said this could be more because of the sheer number of acute and competing risks, with climate risk polling just behind market disruption as the risk that business leaders feel least prepared for. Geopolitical risk rose one place to fourth, cited by 54% of business leaders as a high-impact risk, up from 43% last year, while 42% of firms said market disruption, including AI, is a high-impact risk for their business, up from 33% last year. In addition, market disruption and AI emerged as the risk that business leaders feel the least prepared for, cited by 30% of respondents, up from 19%, rising from fifth position last year to unseat geopolitical risk from the number one spot. “While respondents said that AI was a potential source of competitive advantage, an urgency to embed this technology was prompting “a gold rush” mentality, with the fear of being left behind driving decision making,” Clyde & Co said, with concerns about divergent and contradictory regulations for AI. Eva-Maria Barbosa, partner at Clyde & Co, said: “Organisations are having to deal with risks that were never on their radar in the past. An unpredictable economic environment with shorter and more volatile cycles is being fuelled by growing geopolitical tensions. In response, we are seeing a proliferation of sanctions and a greater regulatory burden that organisations must now navigate.” She said the number of risks alone could be “overwhelming” for any business. “With all of this to contend with, effective planning and risk prioritisation is becoming crucial, with more and more companies understanding the importance of consistent horizon scanning,” Barbosa said. The survey found 68% of business leaders said risk horizon scanning is now a more important part of their role. Carolena Gordon, senior partner at Clyde & Co, added: “Navigating risk is not just a defensive play but a crucial enabler of commercial opportunity and global economic activity. It is encouraging to see that, despite the headwinds, businesses are increasingly taking a proactive approach to risk management.” Clyde & Co said the heightened risk environment is forcing companies to tune in to emerging risks. “Resilience, the ability to get ahead of challenges and react to changing circumstances with agility and speed is now more important than ever,” it said.

Corporate risk at peak levels stymies decisions, survey finds

Clyde & Co reveals a polycrisis of risk has created the highest threat environment for business in a generation

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