One in 10 respondents say that a rise in government regulation is harming the flexibility of their organization.

Summary: Another new entrant on the top 10 risk list, government's expanding role ranks among the top four concerns by respondents of the world's two largest economies: the US and China.

Expansion of government's role is another new risk in 2011. Six of seven sectors see the risk continuing to rise in importance as 2013 approaches.

Key factors

While such measures create opportunities (discussed under public-private partnership), there are also significant challenges posed to both public and private organizations. The position of this risk among the global top 10 is a result of relatively extreme responses in certain sectors and geographies.

Respondents in the banking sector give this risk a higher priority (ranking it fifth) than any other sector – an unsurprising finding given both recent bailouts in the sector as well as ongoing efforts at financial sector reform. Indeed, a number of the panelists we interviewed argued for yet more radical public policy shifts in the sector.

Oil and gas respondents were much more likely, in comparison to other sectors, to indicate that expanding government roles pose a serious competitive challenge, with 55% identifying this issue.

The risk of expanding government is seen as being among the top four concerns by respondents in the world's two largest economies, the US and China, as well as in South Africa and India.

These sharp concerns in key geographies elevated the risk into our global radar. Aggregating all regions covered:

• Roughly one-quarter of respondents to the survey said that the rise in government regulation was increasing their workload and costs.
• 1 in 10 said that it was harming the flexibility of their organization.

Drivers of expansion of government's role risks, as reportedby organizations surveyed

2013 forecast

There is a near consensus across the sectors that the impact of this risk will increase as 2013 approaches. However, there is more geographic variation in opinions.

Geographic view

While respondents based in Europe and in the US almost uniformly expect the impact of the risk to continue to rise, in Brazil, China and India, where processes of liberalization and economic reform are ongoing, the impact of this risk is expected to fall over time.

Expansion of government's role

Managing the risk

As might be expected, risks relating to shifting government roles are particularly hard for companies to mitigate.

Fewer than half of respondents overall said that their companies had implemented measures to respond to this challenge. By far the most common risk mitigation strategy was simply to ensure adherence to legal requirements.

However, 8% of respondents had taken the more active step of adjusting their business strategy to respond to growing government influence.

Sector strategies

• Executives from oil and gas, banking and power and utilities are more likely to manage this risk proactively by attempting to influence government policy through lobbying or other forms of engagement.
• Respondents in these sectors also appeared more likely to say that while measures to respond to this risk are necessary, these are still in the planning stages (banking, 30%; power and utilities, 28%; oil and gas, 27%).
• Health care is the sector most likely to already have taken active measures to respond to this risk at 51%.

Factors mitigating expansion of government's role risk, as reported by organizations surveyed

Organizations' responses to expansion of government's role

Percentage reporting that the expansion of government's role has had negative impacts on competitiveness, by sector

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