A new study finds that business leaders are becoming weary of taking large risks amid economic uncertainty.
- A new Deloitte survey of 122 North American CFOs finds that most of them say it is a bad time to take larger risks.
- The percentage who are optimistic about large risks has decreased from 66% in 2021 to 33% in the second quarter of this year, Axios reports.
- This also marks a decrease from quarter one, where 40% were optimistic, but also marks a small increase from 29% in late 2022.
- 81% of survey respondents rate the economy and financial markets as the greatest risk of the moment, followed by global politics affecting 57% of respondents.
Why It’s Important
In addition to the stress created by the 16-month Russian invasion of Ukraine, the global economy continues to face stressors. High inflation, high interest rates, a tightening job market, and poor housing markets have constricted the economy and nearly pushed multiple countries into a recession.
This stress leads business leaders to be more cautious in their decision-making, taking fewer risks before a recession could stifle upcoming plans and investments. Notably, supply-chain shortages are no longer one of the key risk factors, as the global shipping industry has mostly returned to the pre-COVID status quo in recent months after months of delays.
“If the last few years have shown anything, it’s that threats, like opportunities, can take shape rapidly. That heightened sense of dynamism may account for CFOs’ evolving risk concerns. That said, their understanding of risk has likely fueled their awareness of needing better systems to identify and react to a variety of threats,” says the report.
This dynamism is reportedly causing many business leaders to approach the future with more social awareness and planning in mind. Environmental, social, and governance risks (ESG), cybersecurity, data privacy, and government regulations are becoming increasingly important factors in long-term planning for companies that want to operate in a more volatile and less predictable business environment, the report claims.