Agility to innovate the key for overcoming blindside risks, says BDO

18 June 2018 4 min. read

Professional services firm BDO has highlighted the need for business agility in order to innovate and counter blindside risks in its latest annual global risk landscape report, with organisations in the EMEA region most concerned about geopolitical threats.

In a global survey of more than 500 c-suite and senior risk executives conducted by professional services firm BDO, the fifth largest accounting, tax and advisory network in the world, the firm has found that businesses which favour agility, and thus have the capacity to react and innovate in the face of risk, are typically those which are more successful.

Indeed, respondents who rated their organisations as ‘high-performing’, in every instance also expressed a leaning toward agility, and more specifically a mind for technology-led transformations. On the flip-side, 100% of poorer performing businesses surveyed were unprepared for increasing competition, while 85% are failing to innovate to meet customer needs. In an increasingly fast-moving risk environment, the message is simple, embrace innovation or be left behind.

The report states: “we are seeing a divide opening up between those businesses that embrace change and actively engage in it, and those that are being forced to change. That gap is increasingly obvious when innovation levels are correlated with commercial success.” Nigel Burbridge, BDO partner and global chair, Risk & Advisory Services, adds; “If businesses do not demonstrate an ability to think outside the box, to innovate and to be agile they will get left on the scrap heap of history; they just won’t exist.”Top ten blindside risks for businesses globallyAt the global level, the biggest concern for businesses was that of the regulatory environment, with regulatory risk moving up one place from last year to feature at the top of ten greatest blindside risks, cited by 62% of respondents. As well as being noted by two thirds of the businesses which otherwise considered themselves ‘future-proofed’, concern for regulatory instability was felt across all geographies and industries, ranking as the number one risk for the leisure & hospitality, professional services, and technology, media and telecoms sectors.

Regulatory risk was followed by macroeconomic developments, with 60% of respondents, and environmental and supply chain risks, the two biggest climbers on last year at 56% and 53% respectively – with the latter, as the report notes, being naturally affected by the macroeconomic environment, such as with the breakdown of free trade agreements and imposition of tariffs. As to the environmental realm, the healthcare, manufacturing, natural resources and new energy sectors all noted this as their foremost concern.Top ten risks to businesses in EMEAWhile environmental concerns were also at the forefront of concerns for risk executives in the Middle East, Europe and Africa, in fact more greatly so than the world average with a 66% citation rate, the number one concern for the EMEA region was geopolitical risk at 74% . This was also the biggest concern at the global level for the financial services and private equity sectors – as the report states, political risks shorten business decision-making cycles, and so therefore impact long-term investment spending.

Local executives also had greater concerns regarding computer crime/hacking (62%) than the average global focus (43%), as well as capital funding (53% against 40%) and slightly so for people movement (52% v 49%); a category which jumped from 14th to 7th on the global list in the past year. For the Middle East, over a third of executives say that their companies are at major risk of significant business model disruption. 

Most important ingredients for business innovationIn terms of innovation as a measure to overcome risks, the companies surveyed strongly agreed that the most important factor for innovation was culture, with 77% stating a ‘culture to foster and support innovation.’ The next closest responses were ‘access to the right people’, at just over half of the responses (51%), tied with ‘capacity and capability for creativity’ and just ahead of ‘access to funding’.

Blindside risks, however, are by their very nature risks than cannot be predicted, and so then can’t be prepared for. Rather than guessing at the future, the report says, “the safest option is to become future-proofed through agility, enabling a business to cope with all possible futures and leaving the legacy models behind… The only capacity a business can use to respond to blindside risk is its capacity to change the way it operates at speed: its agility.”