Risk-averse companies lost out in 2021 compared to those who embraced risk during the pandemic, according to a survey by the consultant BDO.
In a poll of 500 c-suite executives, 53 per cent or risk-welcoming businesses said they fared better than expected. Only 16 per cent of risk-averse business leaders said the impact of the pandemic had been less, or much less significant than they had originally anticipated.
In addition, over half risk-averse companies said the impact had been worse than they initially thought.
One in four executives said they could have adapted to the pandemic more quickly – mostly because they faced too much uncertainty.
“Those who managed to make fast, effective decisions were better able to pivot business models and keep staff up-to-date and motivated,” Nigel Burbidge, BDO’s global chair of risk and advisory services, said. “Others suffered from decision paralysis, waiting for news to inform their next steps.”
The report identified three main issues. It said companies should change cultures of blame where they exist and the attitudes to risk that go with it. In addition, it advocates formal risk practices, including risk assessment and frameworks. And, introducing up-to-date technology to develop data-driven risk assessments.
In fact, poor attitudes to risk contributed to the poor performance of many businesses. About one in four survey respondents said they did badly because of “stubbornness: choosing to continue with pre-pandemic plans.”
A massive 90 per cent of organisations said that the events of 2020 had triggered them to completely re-evaluate their risk frameworks.
So, which sectors fared best? The report found that the manufacturing sector was the fasted out of the blocks in adapting products and business models.
In that sector, many businesses retooled to make essential products such as ventilators and personal protective equipment. While companies still worried about getting paid as projects stalled, they embraced new opportunities and succeeded as a result.
The key takeaway for business is to have a greater focus on future risk. In addition, the best organisations tended to have fast and agile risk functions.