Regulatory Change and Increased Governmental Scrutiny Top the Risks that Concern Corporate Leadership, Survey Reveals

Understanding your company’s business risks and the concerns of corporate leadership is an important requirement for any in-house counsel to advise and direct their organization.  With that in mind, if you’re like the 370 board members and C-suite executives surveyed recently by the business consultants at Protiviti® and the North Carolina State University ERM Initiative, you have a lot on your plate.

For the second year in a row Protiviti’s Executive Perspectives on Top Risks survey indicates change in government regulation and ramped-up regulatory scrutiny top the list of risks for board members and executives.

• All respondents were concerned with how regulatory changes and attention to compliance may impact production and delivery of goods and services, the survey revealed.  Increased regulation and its impact on profitability and growth is a major concern among respondents.   
• Economic risks and political uncertainty among national and international leaders that may stunt economic growth opportunities in the U.S. and abroad worry the survey participants.
• Organizations large and small consider recruiting and retaining the “best and brightest” talent a constant risk that could short-circuit reaching operational goals.
• Similarly, cyber threats, which strike at the heart of any company, and managing privacy and identity issues, are notable risks among those surveyed.
• Respondents are preoccupied with the risks surrounding organizational growth via acquisitions along with emerging competition and “disruptive” innovation, according to the survey.

Health Care Specter

New to the survey this year was the funding of the Affordable Care Act (ACA). The “unknown” costs of complying with the ACA are haunting business leaders across the board, according to the survey.  The uncertainty of ACA’s costs and how to pay for them has business leaders wondering which investments will be diverted from new business growth opportunities. 

Board members consider the business environment more risky than management does, according to the survey.  The board members’ overall risk assessment scores for their top five risks “increased from 2013, suggesting a shift toward a perceived riskier environment for 2014,” according to Protiviti.

Risk Perspectives

This contrast between board members and directors on their perspectives about risks “calls for conversations between them about risk issues on the horizon,” according to the survey’s authors.

Asked to focus on survey responses of Chief Compliance Officers, Chief Legal Officers and General Counsels, Protiviti Managing Director Carol Beaumier told The Advisory those in the corporate legal profession are just as concerned about the risks regulatory changes and increased regulatory scrutiny will have on their delivery of legal goods and services.

“When we looked separately at the Chief Legal Officers and Chief Compliance Officers, we found that their top five risks included two risks that just missed the top 10 list overall––specifically: 1) shifts in social, environmental and other customer preferences and expectations that may be difficult to identify and address on a timely basis; and 2) access to sufficient capital and liquidity to sustain growth.  While this result could be due to the smaller size of the group, it is nonetheless of interest,” Beaumier said.

Thanks to Protiviti for allowing us to share these findings and offering additional insights.  These are only highlights.  You can download the complete Executive Perspectives on Top Risks for 2014—just click here.