10 December 2007

Dark Future for the World Economy?

Ernst & Young issued a report entitled: "Top 10 Risks for Business in 2008".

You may be thinking that credit crunch is the biggest risk... Unfortunately, you are grossly mistaken. Ernst & Young sees regulatory and compliance risk as the greatest danger:

As the greatest strategic challenge facing leading global businesses in 2008, the industry analysts we polled selected regulatory and compliance risk. This is being driven by an escalating regulatory burden in many markets, as well as numerous compliance challenges as companies extend their value chains well beyond Europe, North America, and the BRICs (Brazil, Russia, India and China). The possibility of regulatory intervention in sectors such as pharma, biotech, insurance, telecoms and utilities, is further elevating this risk. Such intervention could shape the competitive environment and drive fundamental change in business models.

But credit crunch is surely there - it is the second most important risk:

Our analysts acknowledged that few sectors would escape the impact of major global financial shocks. Biotech and utilities firms, for example, would have trouble raising capital; banking, asset management, and insurance companies would be likely to suffer direct losses from market movements; and after making high-cost exploration investments – oil & gas companies might suddenly find themselves facing low prices if the global economy moves into sudden recession.

Risk No.3 is aging workforce and consumers:

An increasing strategic risk for the majority of industries is the threat posed by workforce and consumer aging. Sectors such as asset management and insurance are experiencing dramatic shifts in demand and competitive battles are being fought for savings products that will appeal to the growing group of older consumers. Other firms, for example, those in the auto sector, are facing severe competitive challenges as a result of their aging workforces.

The whole report is available here.

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