Examining Present Business Risks: Companies Identify More Threats Than Ever Before
Businesses associated with listed companies now face more potential risks compared to two years ago, as per recent research. - Companies under scrutiny face elevated risks in business compared to two years prior, according to a recent study.
Research carried out by the University of Hohenheim and Crunchtime Communications offers insights into the perceived risks faced by 134 German companies listed on the SDAX and MDAX indices. These organizations not only acknowledged more threats but also evaluated them more thoroughly than two years ago.
Bureaucracy, cyber-attacks, geopolitical developments, and financial matters were risks identified by 98%, 98%, 86%, and 86% of the surveyed companies, respectively. Internal concerns like competition, legal and compliance issues, and skills shortage were also prevalent, with over 80% of companies mentioning each. Interestingly, more firms are acknowledging climate change as a risk. The themes of pandemic, energy crisis, and inflation appeared less frequently in 2024 compared to 2023.
Intriguingly, the study revealed that CEOs remain hesitant to discuss risks in their forewords. In fact, they were even more reticent than in 2023, with cyber-risks and personnel issues getting the least attention. "Given the pervasive cyber-threats, the silence from CEOs can be justified," explains Johannes Fischer, managing partner of Crunchtime and a lecturer at the University of Hohenheim. However, he also notes that the omission of discussion on skills shortage and other personnel-related issues was a missed opportunity.
Real-World Context
Understanding the broader economic and market trends can help paint a fuller picture of the risks faced by SDAX and MDAX companies.
- Global Exposure: The DAX, with a broader international focus, faces greater geopolitical risks due to its extensive exposure. In comparison, the MDAX, consisting of mid-cap companies, might enjoy a more domestically focused strategy, offering some risk mitigation.
- Skills Shortage: This issue affects various markets including Germany, particularly in high-tech sectors.
- Economic Growth and Recovery: Sectors such as defense, energy transition, and AI are expected to drive economic growth, offering potential solutions to some risks.
- Domestic Focus: The MDAX's domestic focus can be seen as a risk management strategy, protecting against international trade disputes and tariffs.
- Innovation and Fiscal Stimulus: Plans like the proposed boost to defense and infrastructure spending by Chancellor Friedrich Merz could contribute to economic growth, aiding both DAX and MDAX companies.
Possible Risks for SDAX and MDAX Companies
Based on general market conditions, potential risks for companies in these indices might comprise:
- Skills Shortage: Difficulty in securing skilled workers, particularly in technology and manufacturing sectors.
- Geopolitical Risks: Primarily a concern for international-facing industries, though less so for MDAX.
- Regulatory Changes: Shifts in EU regulations could affect sectors like energy and automation.
- Market Volatility: Economic fluctuations or unexpected events impacting investor confidence.
Again, these risks are speculative without specific data from the University of Hohenheim and Crunchtime Communications' study.
The Community and Employment policies of companies in the SDAX and MDAX indices might further detail their strategies to mitigate the skills shortage, a significant risk identified by the study. In light of the increasing emphasis on climate change and energy transition, these policies could also address the role of finance and industry in securing a sustainable future for these businesses.
As the real-world context reveals, geopolitical risks are more prominent for the DAX due to its global exposure, while the MDAX, with a more domestic focus, might gain a competitive advantage. Understanding these risks and the potential solutions within the sectors of defense, energy transition, and AI, as well as the possible fiscal stimulus, could aid CEOs in drafting more comprehensive forewords that address myriad risks facing their businesses.
