Global business too easily spooked by short-term economic uncertainty

The Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA) surveyed over 1,300 members for their perspectives on how economic crises affect long-term business planning.

Key findings:

• Only 31% of respondents believe the ongoing US debt crisis will ultimately push the global economy towards recession.
  
• Despite this more than half (53%) expect higher US interest rates and 70% anticipate a weaker dollar.
  
• 60% of respondents said that business is too sensitive to economic crises.
  
• 57% agreed that their organisation must seek new ways to be resilient and less susceptible to macro-economic volatility.

CGMA business experts make up the world's largest community of management accountants and guide business decisions across the globe, including at 95 of the world's top 100 brands and 91 of the Fortune 100. They hold senior positions, including CEO, CFO, and finance director, and have a broad perspective on the long-term prospects of their organisations, their markets and their regions.

Charles Tilley FCMA, CGMA, chief executive, CIMA, said: "There will always be another US debt crisis, Arab Spring or Eurozone disaster just around the corner.

"This uncertainty simply cannot drive business strategy. These 'grey swans', as some business commentators have termed them, are prompting organisations to cut spending and investment at a time when innovation is absolutely vital to our economic health.

"Indeed the seizing of opportunities is key to long-term survival and so we must all plot a suitable course between risk and innovation, managing the approach and mitigations put in place to address these uncertainties."

Five top tips for business leaders to build resilience

It is vital for organisations to adjust their risk radar and anticipate the impact of such scenarios on investment and future growth without being diverted from creating a suitable long-term strategy. This will build resilience in the face of ongoing economic uncertainty.

1. Understand your business model. What creates, and could potentially destroy, value in your business?
2. Harness the power of transparency. Create a line of sight between capital sources and how it will be invested in the sustained success of the business, beyond the short-term.
3. Ensure robust information flows. Build confidence in the right information that drives investment and risk mitigation decisions.
4. Go beyond defining a risk appetite. Have a risk attitude that empowers all in the business to take appropriate risks that drive growth and opportunity.
5. Be clear on the skills and talents you need now for tomorrow. Identify and close potential skills gaps you may have when considering your future business model, markets and innovation agenda.