Private Company CEOs Feeling the Heat to Grow Business, Improve Risk Management, Study Finds

If private company C-level executives are feeling a bit schizophrenic these days, it's understandable, according to a study by PricewaterhouseCoopers.

Apparently, with the business community beginning to peek out from behind the cover it's taken during the economic onslaught of the past two years, many executives feel compelled to assume more risk to grow their businesses. Still, a greater number of executives believe, at the same time, that they've already taken plenty of good chances to capitalize on opportunities.

So, which is true--do they need to do more or have they done enough?

The PwC study of 235 chief executives and chief financial officers at U.S. companies in the product and service sectors averaging nearly $180 million in annual revenue found that just about half felt pressure to take on more growth related risk, and, simultaneously, nearly nine in 10 believed they had done enough to prompt upward movement in their businesses.

That finding, PwC said, highlights a "contradiction between current perception and future expectations."

More than three-fourths of the executives in the study said that they had adequately assessed financial risk in the past two to three years, and 60 percent expressed certainty that they'll be able to handle all manner of threats over the next few years. Only a scant 20 percent questioned their processes for risk management.

"It's interesting that the majority feel their functions are effective, yet also believe they need to improve some important areas of the risk management process," said Ken Esch, partner in PwC's Private Company Services practice.

The overwhelming majority of executives, about 84 percent, believe that their risk management functions need to improve to stay abreast of increasing business peril, results show.

PwC suggested that particular response might result from forecasts of increased risk across multiple industries. Indeed, about 37 percent of executives expect that the risks their companies face in the next two- to three-year period will exceed those encountered in the most recent time.

Executives in the survey cited a number of key areas to address to improve risk management, including, in ranked order of importance:
  • Quality and timeliness of information: 71%
  • Availability of information: 65%
  • Quantifying risks: 59%
  • Culturally embedding risk management: 57%
  • Identifying and measuring the potential benefits of risk: 55%
  • Overcoming conflicting corporate priorities: 51%
  • Integrating risk management with business processes: 51%
  • Lack of risk management knowledge and skills across the company: 51%

"This just shows how forward-looking private company executives are, acknowledging the economy and their business plans are changing and taking steps now to ensure future business stability," Esch said.

Companies with operations abroad recorded a higher level of confidence than their domestic counterparts about managing operational risk, PwC said. Those companies also seemed less concerned about risks surrounding financial misrepresentation, high financial leverage, and asset misappropriation.

"Now that companies have weathered the economic storm, they're looking to grow again," Esch said. "But many of them feel the domestic market is tapped out, so they are looking for growth opportunities in international markets," he said.

"That generally means taking on more risk, especially for companies entering foreign jurisdictions for the first time in places where they may know little about the local business practices or regulations."

| Comments(0) | Share

Comment and Contribute

    (Maximum characters: 1200). You have 1200 characters left.