Financial uncertainty, including risks associated with credit, liquidity, interest rates and currency, is the biggest risk to earnings, according to a recent survey by the Association of Financial Professionals (AFP). Over half of all respondents expect further uncertainty in the coming years.
The 2012 AFP Risk Management Survey asked chief financial officers (CFOs), corporate treasurers and other senior finance executives about risks that worry them now, those most likely to cause uncertainty in the next three years, and actions they are taking to mitigate those risks. It is the first in a series of annual risk management surveys to be published in collaboration with the Global Risk Centre of the Oliver Wyman Group.
Three quarters (72%) of responding organisations said their top to concern is managing financial uncertainty, including the risks associated with credit, liquidity, interest rates and currency/foreign exchange (FX). Respondents also cited risks associated with macroeconomic conditions, such as the pace of economic growth and inflation (38%), and business/operations risks, such as supply chain and/or production disruptions, litigation, labour and outsourcing (36%). External risks (country, regulatory, natural disaster) and commodity risks (power/heat, crude oil and distillates, agricultural and metals) are also concerns for a significant share of organisations, but to a lesser degree. A full 41% of respondents expect even more earnings uncertainty in the coming years.
“Uncertainty is here to stay,” said Jim Kaitz, AFP’s president and chief executive officer (CEO). “One way organisations can take control of rising uncertainty in their earnings is by adopting a new mindset and making more risk-adjusted decisions. The ones that do this effectively will have a competitive advantage.”
Read the full results of the 2012 AFP Risk Management Survey.
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