Cost-cutting and pricing pressures fastest-growing risks in 2011: Ernst & Young
(Toronto – 18 January, 2011) Cost-cutting and pricing pressures will be major concerns for Canadian businesses in 2011, as they are the fastest climbers on Ernst & Young’s top 10 risks list, according to the firm’s fourth annual Global Business Risk Report.
While this year’s report sees the expansion of government’s role as a new entrant to the top 10 risks list, the most significant shifts from 2010 include cost-cutting moving up four places to the number-two position and pricing pressures moving up 10 places to fifth spot.
“We’re seeing intense competition in the global marketplace that only looks set to escalate,” says Anne-Marie Hubert, Ernst & Young’s Advisory practice leader in Canada. “As Canadian companies fight for market share against a backdrop of slow growth in developed countries and a land-grab in emerging markets, it’s no surprise that pricing pressure is the biggest climber this year — and, in order to price right, companies need to optimize costs.”
Notably, access to credit has fallen from the number-two risk in 2010, to the number-seven risk for 2011, indicating some improvement in business lending conditions.
In light of current and forecasted growth rates, emerging market demand growth was cited as the top business opportunity for 2011.
“Emerging markets offer enormous potential for growth, particularly for resource-based exporting economies like Canada, who are chasing an export-led recovery on the back of weaker currencies,” says Hubert. “Canadian companies would be wise to incorporate some of these identified opportunities as part of their plans for the new year, if they haven’t already.”
The report pinpoints excellence in investor relations as a top 10 opportunity, which is significant for Canada as public companies complete the transition to International Financial Reporting Standards this year, and look for ways to be more transparent and win the confidence of investors.
Innovating in products, services and operations and investing in cleantech were identified as the second- and fifth-biggest opportunities respectively for global businesses in 2011. Other trends identified as important include improving execution of strategy across business functions, creating new marketing channels with social media and a growth in public–private partnerships.
Top 10 global business risks for 2011: (2010 ranking from in brackets)
- Regulation and compliance (1)
- Cost-cutting (6)
- Slow recovery/double dip recession (3)
- Market risks (new)
- Pricing pressure (15)
- Managing talent (4)
- Access to credit (2)
- Social acceptance risk/corporate social responsibility (9)
- Expansion of government’s role (new)
- Emerging technologies (13)
Top 10 global business opportunities:
- Emerging market demand growth
- Innovating in products, services and operations
- Improving execution of strategy across business functions
- Investing in IT
- Investing in cleantech
- Investing in process, tools and training to achieve greater productivity
- Mergers and acquisitions
- New marketing channels
- Public–private partnerships
- Excellence in investor relations
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