Reputational risk for businesses is rising and business confidence is on the downswing, according to a new study by CNA Hardy.
“In an increasingly complex, tech-led, interconnected global economy, business leaders are being tested like never before,” said Dave Brosnan, CEO of CNA Hardy. “The result is that confidence has dipped, investment in business fundamentals is down across the board, and reputation risk has emerged as the new threat that stalks the corridors of power.”
There is a clear divide between the East and West in terms of business confidence, according to CNA Hardy’s 2019 Global Risk & Confidence Survey. Optimism has fallen among executives leading European, UK and North American businesses, while it continues to rise in the Asia-Pacific region. The drop in business confidence in Western economies was driven by a sharp fall in Europe, from 70% to 50%, according to the study. Asia-Pacific is the only region to see a rise in business confidence in the last six months, up 23% to 65%.
More than 80% of business leaders globally believe they are operating in a moderate to high risk environment. While economic, cyber and technology risk are business leaders’ top three concerns, concern over reputational risk is growing faster than any other, CNA Hardy said. Reputation risk is up 29% globally and 33% in Europe. It has doubled in the Asia-Pacific region.
Driven by executives’ concerns about risk, the rate of investment in business fundamentals saw a dramatic drop in the six months to May, according to the study. Investment in talent and research and development were among the hardest-hit areas.
“Uncertainty is a key driver of high levels of caution about investment in business fundamentals,” Brosnan said. “Companies are simply not prepared to put capital at risk in an environment where unpredictability reigns. The inevitable – but extremely damaging – consequence is that fewer companies are maintaining investment in technology, R&D and talent to support the top line.”