Business Leaders: Be Prepared

Despite a majority of global business leaders expecting a recession within the next year, many still have a positive outlook on the economy. Some leaders even reported feeling very prepared heading into a recession.

According to Aon’s 2022 Executive Risk Survey, released this October and titled “Making Better Decisions in Uncertain Times,” 79% of global business leaders expect a recession within the next year with 43% believing it is very likely. And just one-third (35%) of leaders say they feel very prepared for the economic downturn with 47% feeling somewhat prepared and 18% feeling only a little prepared or not prepared at all.

So, what separates confident leaders from the rest?

For companies that feel very prepared heading into a recession, addressing risk isn’t a choice — it’s a question of survival. Sixty-two percent of very prepared leaders agree that their company’s appetite to address risk has increased in response to the current economic climate.

Perhaps surprisingly, only 10% of very prepared companies reported becoming risk averse due to current macroeconomic conditions compared to 39% of not very prepared companies. A majority of very prepared leaders — 90% — reported that current economic conditions have actually increased their appetite for risk.

This could be a result of lessons learned from some of the risks business leaders weathered throughout the past few years, with one majorly disruptive event being the COVID-19 pandemic. The report said the COVID-19 pandemic taught leaders how to respond quickly to emerging risks, which could be giving them confidence as they head into a recession. In fact, 61% of very prepared leaders agreed that all risks are interconnected and that the most successful companies can handle risk regardless of where it comes from.

With this in mind, most surveyed business leaders said their companies are spending a great deal of time on issues related to higher costs/inflation (43%), a financial crisis (42%), energy supply (41%) and cyber attacks (40%).

Higher costs/inflation and a financial crisis have become the second greatest concern for business leaders in 2022, according to the report, compared to last year when inflation ranked tenth. In contrast, last year’s top two risks — cyber attacks and a future global pandemic — fell this year to fourth and eighth, respectively.

As they look to 2023 and a potential recession on the way, Aon’s report said that based on survey data, the most prepared leaders are resisting the impulse to slow hiring or delay capital investment, focusing on input from internal teams as well as outside advisers, and viewing COVID-19 as something that exposed new risks and changed how they need to think. Based on the report’s findings, it seems navigating risk will be a key differentiating factor.