Oh for the good old days, when analysts would carp about how Sarbanes-Oxley, Regulation FD, and other regulatory burdens were stiffling corporate innovation. These days, the credit crisis has made onetime concerns about Section 404 seem almost quaint by comparison.
Indeed, a new survey of Ernst & Young analysts, who cover 11 core sectors, found that the credit crisis is now their top concern for the coming year. Regulation and compliance, the leading concern of these analysts last year, dropped to second place on the list.
Other risks arising from the credit crisis jumped into the top ten, as well. The economy was barely mentioned in the 2008 E&Y risk survey. This year, the souring economy came in at No. 3. In addition, business model obsolescence—no doubt linked to current market changes and volatility—placed ninth on the list. It didn’t show up on the list in 2007.
At the same time, it appears that the E&Y analysts expect big battles to break out in the sectors they cover. This may not be overly surprising. With non-traditional competitors eyeing new sources of revenues, and with regulatory and technology changes, businesses are seeing new entrants—sometimes from different countries—invade their territory.
Concerns among analysts about ‘non-traditional entrants’ shot up from No. 16 on the list in 2007 to No. 5 this year.
Also of note: sector analysts clearly are expecting meaningful carbon legislation coming down the pike. Worries about radical greening initiatives jumped from ninth to fourth on the E&Y analysts’ list of business risks.
At the same time, reputational risks shot up to tenth place, up from No. 22 last year. In some cases, it would appear those two areas of concern are linked.
“Failure to be seen to be responding to climate change could have significant reputational risks for companies in high-carbon sectors and elsewhere,” said John Murphy, global managing partner (markets) for Ernst & Young.
A few more-traditional concerns appear to be flying below the radar at the moment, however. Those include intellectual property theft and supply-chain interruptions. Given the dire economic problems just now besetting China, those threats may well make it back onto next year’s list.
The 2009 top 10 risk rankings*
1. The credit crunch (2)
2. Regulation and compliance (1)
3. Deepening recession (New)
4. Radical greening (9)
5. Non-traditional entrants (16)
6. Cost cutting (7)
7. Managing talent (11)
8. Executing alliances and transactions (7)
9. Business model redundancy (New)
10. Reputation risks (22)
* 2008 rankings shown in parentheses
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