Risk management – balance is everything

in Industry insights, 20.09.2016

The higher the risk, the greater the return is a basic premise believed to also apply to business. However, the true art behind managing a business lies in maximizing profit while minimizing risk. It seems that CEOs abroad appear to be doing better at this balancing act than Swiss CEOs – at least, according to their self-assessment as expressed in KPMG’s CEO Outlook. More than three-quarters (78%) of CEOs abroad state that they take on appropriate risks in order to reach their targeted growth, while 17 percent consider their growth strategies to be too risk-averse and only 4 percent feel that their business is taking on too much risk. In comparison, Swiss CEOs assess their situation from a much more conservative vantage point. Just over half (56%) are comfortable with the risks they are taking, compared to a third of all Swiss CEOs surveyed who felt that they should be taking more risks in order to achieve their growth target. Overall, one in ten CEOs feels that their company’s appetite for risk is too great.

Broad risk spectrum – weighted differently

While both foreign and Swiss CEOs are exposed to a broad range of risks, they weight these risks differently. About a third of CEOs in Switzerland are particularly concerned about risks in third-party services and disruptive technologies (32% each) followed by risks found along the value chain (28%) and ecological, geopolitical and cyber risks (26% each). Abroad, on the other hand, 28 percent of CEOs find regulatory risks the most threatening, followed by technology (26%) and strategy (25%) – while for a third of the CEOs, cyber risk overshadows all others.

CEO Outlook - Risks

(click graphic to see the full list)

Risks coming from the digital world seem harder to grasp and therefore harder to anticipate than traditional risks, such as currency or operational risk. Compared to their foreign counterparts, Swiss CEOs are more likely to feel that they are sufficiently prepared for possible cyber risk events (CH 14%; Global 5%). Less than half of the CEOs in Switzerland and just under a quarter of CEOs abroad (CH 42%; Global 26%) believe that they are well prepared for a completely unforeseeable event.

Courage to innovate

Risk aversion paired with a high affinity for prevention are typical Swiss virtues. The Swiss economy has done very well for decades by following these two maxims. However, an attitude that’s too conservative towards risk may hinder growth in an economy of the future where the pace of change is always accelerating. Nearly all of the CEOs surveyed are convinced that optimal risk management will foster innovation. The CEOs in Switzerland who responded are also very much aware that risk management is a leadership task – much more so than their counterparts abroad. This is why, when talking with my CEO colleagues in Switzerland, I encourage them to take more of an entrepreneurial risk approach to cultivate innovation and renewal.

Full survey: CEO Outlook – Now or Never

What is the CEO Outlook?

KPMG has asked more than 1,300 CEOs in a global cross-industry study on their take on medium-term growth perspectives and transaction expectations, on the promotion of innovation, the handling of digitization and risks and human resources.

In the current series of articles, I will further highlight some of the specific perceptions of the Swiss CEOs who participated in this study.

 


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