South African economy better at using 'risk' to increase competitive advantage

The South African economy has overtaken developed markets when it comes to capitalising on the benefits of risk management, according to a new study from BT Global Services.

Sixty-eight per cent of South African enterprises see risk management as a means of increasing competitive advantage in comparison to just 44% of developed economies, and 60% also think that risk encourages innovation and creativity compared to 43% in developed economies.

They have acted on this by being more likely than businesses in the US and Europe to have a board-level corporate security officer (CSO) or corporate risk officer (CRO) and to view this as a valued investment.

However, the results also indicate that businesses in South Africa are not moving as fast to address risk in the global economy as competitors in other emerging markets.

For example, only 50% of businesses in South Africa have a risk management plan that takes global risks into account, compared to 85% in India, 80% in China and 74% in Brazil. And nearly one in 10 South African respondents disagreed that risk management in their company is an effective use of resource. This sentiment was virtually non-existent among respondents from India and China.

The results suggest that developed markets, contrary to accepted wisdom, are increasingly looking to become the prime movers in establishing international collaboration initiatives. South Africa is well-placed to capitalise on this, but is in danger of falling behind other emerging markets in its efforts to do so.

BT commissioned Datamonitor to undertake the study of 2 000 senior executives in the US, UK, France, Germany, Spain, Sweden, Brazil, China, India and South Africa. The vast majority (87%) of businesses in South Africa see international collaboration, either intra- or inter-company, as being vital to their success in the future. However, a large proportion (53%) also believes that organisations from developed markets remain suspicious of the assurances they offer about their risk management policies, particularly when it comes to ICT, which clearly bodes ill for successful collaboration.

Mark Danton, Global Head of BT's Security Proposition Marketing, said: "Developed markets have been wary of risks associated with aggressive economic growth. Our evidence suggests that South Africa, fully committed to international collaboration, now boasts risk management strategies that surpass even 'Western' standards and can be trusted to support innovation and creativity. However, businesses in South Africa must not sit still - continued efforts in this area will be vital if they want to stave off the competition from other emerging markets."

'The inexorable rise in oil and commodity prices' is rated the highest global risk for the last 12 months by businesses in South Africa. Energy and water security is rated the highest global risk for 2009, followed by the onset of a global economic slowdown sparked by a US recession. By contrast, businesses in the US and Europe are less nervous of future risks, although 36% still believe they will be impacted or highly impacted by a global economic downturn.

Danton said: "Businesses in developed markets appear quite bullish about the potential impact of global risks such as epidemics, terrorism or water security, but, ironically, they may be less prepared for major global events than their counterparts in emerging markets. It is vital that international organisations ensure their risk management plans cover all eventualities - no matter how unlikely the risk seems. And this should be seen, as it largely is in emerging markets, as an opportunity to stimulate growth and liberate innovation, rather than a chore or an unnecessary expense."

The full report, "Threatening Skies: Risk in the Global Economy", can be downloaded from www.bt.com.