12.09 PM Tuesday, 5 December 2023
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 05:28 06:46 12:12 15:10 17:32 18:51
05 December 2023

Credit crisis aftershocks top 2009 business risks

By Staff Writer

Top strategic business risks facing companies globally during 2009 are credit crunch aftershocks, regulation and compliance, and deepening recession, according to Ernst & Young's 2009 Global Business Risk Survey.

The survey found businesses around the world are increasing their focus on a wide variety of risks as global economic conditions continue to be affected by the aftermath of the credit crunch.

Reputation risk has moved up 12 positions into the top 10 and business model redundancy is a new entrant at ninth among challenges facing businesses in 2009. Credit crunch aftershocks and global recession have displaced regulation and compliance from last year's top spot.

More than 100 analysts ranked the credit crunch, regulation and compliance, deepening recession, radical greening, non-traditional entrants, cost cutting, managing talent, executing alliances and transactions, business model redundancy and reputation risks.

Michael Green, Partner & Risk Management leader at Ernst & Young Middle East, said: "While most of the risk categories are relevant to the Middle East, the top three risks that may have the greatest implications on regional business in 2009 are the deepening global recession, the effects of the credit crunch and reputation risks."

Deepening global recession and credit crunch affects the region through a reduced demand for oil and a reduced ability to invest in real estate both of which have been significant drivers of growth. "These tough times have clearly shown us that world economies are closely integrated." Green said most Middle East executives had for many years considered reputation to be a top-10 risk.

Businesses must clearly understand their risk profile and develop strategies to control and mitigate risk to an acceptable level. Corporate business leaders should also make sure they get enough feedback that approved risk mitigation strategies and controls are being applied within an organisation to avoid nasty surprises.

However, because of increased volatility, organisations need to be nimble and be ready to update and change strategies and plans in response to new macro developments. "Accurate cash flow forecasting has become very important," said Green.

Omar Bitar, Managing Partner, Advisory Services at Ernst & Young Middle East, said: "It is notable in almost every major sector, at least one of the top 10 risks falls in each of the four risks quadrants of financial, compliance, strategic and operations risks. This emphasises the importance of taking a broad approach to risk management, as these risks could emerge from any part of the enterprise and its activities."

In real estate, the survey shows credit crunch aftershocks are perceived globally as the top risk. As developers may slow down and reprioritise their projects, the construction sector may also suffer from over capacity.