Uncertainties around political risk reign supreme for FDs in 2015

Tensions in the Middle East, Ukraine and the possibility of a EU referendum are still on the minds of many company boards

In fact, with over half of respondents citing politics as their key concern, it easily eclipses concerns about the euro area and emerging markets. This is a subject touched upon in a recent Deloitte survey.

In the report, Ian Stewart, chief economist at Deloitte, said: “Over the coming months corporate sentiment is likely to be buffeted by the flow of news from overseas and developments on domestic politics. I was struck by how CFOs who filled in the survey later, in mid-December, after the equity market had dropped sharply, reported much lower levels of risk appetite than those answering the survey at the end of November.

“It was a similar story last year at the time of the Scottish independence referendum. CFOs who completed the survey before the results of the referendum were in rated external economic and financial uncertainty as being twice as high as those who responded after the results were known.

“UK corporates see UK political developments as a significant risk factor this year. The British Chambers of Commerce picked up on this theme last week when it warned political leaders against what it described as ‘tawdry politics’ which could dent business confidence.”

Although overshadowed by political risk, marketplace competition was the next biggest concern for FDs.

Essentially, FDs have had to adapt to taking on more work, which includes helping to identify differentiators in a competitive market place, both for the organisation and its products and services. So its perhaps unsurprising that the second biggest barrier for FDs in 2015 will be marketplace competition.

But according to Grant Thornton, “competition is at the heart of concerns but this shouldn’t be viewed as an unhealthy thing. As the economy starts to thaw faster, competition will make organisations more innovative, look to new markets – especially in territories outside of the traditional EU nations – and focus businesses’ minds on the need to recruit, retain and motivate key personnel.”

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By Shané Schutte

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