Developing economies using ‘risk’ to increase competitive advantage

Enterprises in Brazil, China, India and South Africa are more likely than those in ‘developed’ economies to see risk management as a means of increasing competitive advantage (81 percent to 44 percent) and encouraging innovation and creativity (73 percent to 43 percent). They are also significantly more likely to be investing heavily in risk management strategies and systems than their counterparts in the US and Europe (54 percent to 36 percent).

They have acted on this by being more likely to have a board-level corporate security officer (CSO) or corporate risk officer (CRO), more likely to view this as a valued investment and twice as likely to have a risk management strategy for global risks. The results suggest that developing countries, contrary to accepted wisdom, are increasingly looking to become the prime movers in establishing international collaboration initiatives.

BT commissioned Datamonitor to undertake the study of 2,000 senior executives in the US, UK, France, Germany, Spain, Sweden, Brazil, China, India and South Africa. The vast majority (89 percent) of businesses in the developing world see international collaboration, either intra- or inter-company, as being vital to the success of their business in the future. However, a large proportion (68 percent) also believes that organisations from developed markets remain suspicious of the assurances they offer about their risk management policies, particularly when it comes to ICT, which clearly bodes ill for successful collaboration.

Francois Barrault, CEO, BT Global Services, said: “Developed markets have been aware of the risks associated with countries experiencing aggressive economic growth. Our evidence suggests that developing countries, fully committed to international collaboration, are building risk management strategies set to go beyond even ‘Western’ standards. They are demonstrating the trust required to support innovation and creativity for their partners.”

The impact of major global events and issues is taken into consideration by the risk management strategies of 72 percent of businesses in Brazil, China, India and South Africa, compared to just 48 percent in the US and Europe. Energy and water security is rated the highest global risk for the next twelve months by the former, followed by the onset of a global economic slowdown sparked by a US recession. Businesses in mature markets are less nervous of future risks overall, although 36 percent still believe they will be impacted or highly impacted by a global economic downturn.

Barrault said: “Businesses in developed markets appear quite bullish about their ability to deal with potential impact of global risks such as epidemics, terrorism or water security, but, ironically, they may be less prepared for major global events than their counterparts in emerging markets. It is vital that international organisations ensure their risk management plans cover all eventualities – no matter how unlikely the risk seems. And this should be seen, as it largely is in emerging markets, as an opportunity to stimulate growth and liberate innovation, rather than a chore or an unnecessary expense.”

The full report, ‘Threatening Skies: Risk in the Global Economy’, can be downloaded from here.

•Date: 20th June 2008• Region: World •Type: Article •Topic: Operational risk
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