Clyde & Co, a law firm specializing in insurance, trade, and aviation, has released findings indicating that 67 percent of surveyed leaders perceive today’s risk landscape as significantly more complex than it was three years ago during the COVID-19 crisis.
Global regulatory challenges, often intricate and conflicting, are identified as substantial barriers to corporate growth. The imperative to adopt Artificial Intelligence (AI) is fostering a “gold rush” mentality around this transformative technology.
Furthermore, the recruitment and retention of talent, particularly from overseas, have become progressively challenging and costly.
Eva-Maria Barbosa, Partner at Clyde & Co, remarked, “Organizations are now grappling with risks that were previously off their radar. An unpredictable economic environment, characterized by shorter and more volatile cycles, is exacerbated by escalating geopolitical tensions. Consequently, we are witnessing a proliferation of sanctions and an increased regulatory burden that organizations must navigate.”
“Add to this the growing impact of AI, and the sheer volume of risks can feel overwhelming for any business. Given these dynamics, effective planning and prioritization of risks are becoming indispensable. More and more companies recognize the critical importance of continuous horizon scanning,” Barbosa added.
According to Clyde & Co’s annual Corporate Risk Radar, a convergence of economic instability, geopolitical turmoil, and the disruptive influence of AI has propelled corporate risk levels to their highest point in 12 years.
This survey, conducted in partnership with research consultancy Winmark Global, involved C-suite decision-makers, in-house legal teams, and General Counsel. It revealed that mounting threats across multiple fronts are creating a ‘polycrisis’ of risk, significantly influencing corporate decision-making and costing companies up to 5 percent of their revenues. More than a quarter of respondents indicated that heightened risk perception was impeding ‘bold decision-making’.
Economic risks such as inflation, interest rates, and currency volatility remain the foremost concerns among business leaders. People-related challenges, including talent attraction, retention, skills development, management, and succession planning, also rank prominently.
Divergent and sometimes conflicting regulations, particularly concerning AI, have elevated regulatory compliance to the joint second-biggest concern, marking a 9 percent increase from 2023. Concurrently, ongoing regional conflicts and political uncertainties have driven up geopolitical risks by 11 percent, placing them fourth on the list.
Carolena Gordon, Senior Partner at Clyde & Co, commented, “This year’s report underscores that the landscape of doing business has become more unpredictable than ever. Most of us now acknowledge that ‘normalcy’ is a thing of the past and that a different mindset is required for assessing and responding to risks.”
Gordon continued, “Navigating risks isn’t merely a defensive strategy but a pivotal facilitator of commercial opportunities and global economic activity. It’s heartening to observe that, despite these challenges, businesses are increasingly adopting a proactive stance toward risk management.”
The report also highlights that market disruption, including AI, is now perceived as the least-prepared risk area by leaders, surpassing concerns over climate change, geopolitical tensions, and societal impacts.
General Counsel expressed the least confidence in their readiness to confront market disruption, underscoring their direct engagement with these risks. Scenario planning and ongoing risk horizon scanning have become integral components of executives’ roles.
The growing tension between boards and executive risk management is palpable, with some boards heavily reliant on executives for identifying and presenting risks.
Source: reinsurancene.ws
