Strategic Business Risk

2008 – the Top 10 Risks for Business

In collaboration with:

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It is never the risk that About this Report
Risks are inherent in every forward-looking business decision so successful risk management should
causes damage or be an integral part of an organization’s strategy and operations – an important dimension of good
management practice.
creates opportunities –
There has been a great deal of work done in the area of risk management in recent years.
it is how we respond Ernst & Young has been engaged in significant global activity to clarify stakeholder perspectives,
map management activities and identify leading practice from which all can benefit. Likewise, many
companies have invested significant resources globally in risk and compliance initiatives.

Financial risk and regulatory risk have been the focus of much of this effort. In both cases, there are
externally determined rules and frameworks with which companies need to comply and emerging
best practice guidance on processes and controls that can help. We have worked with many
companies who have found that the challenge of compliance can lead to opportunities for
performance improvement through improved processes and enhanced communication. Some
companies are now looking more closely at their operational risks, prioritizing these and thinking
about how they can manage and monitor these in a coordinated way, the result of which can again
be opportunities for performance improvement. What is clear is that to gain further business
advantage, companies must increasingly look at the extended risk universe, from finance and
compliance risk – to operational and finally, strategic risk.

A Different Perspective on Strategic Risk

Our experience, however, suggests that strategic risk has not necessarily benefited from developments
in management practice. Much that has been written about strategic risk seems to be at such a
macroeconomic level that the implications for action by the management of a specific company
can be lost. More significantly, the different implications for companies operating in different sectors
can be blurred. Someone’s challenge is frequently someone else’s market opportunity.

We decided to explore the area of strategic risk from a different perspective. In collaboration with
Oxford Analytica we focused on the strategic risks facing 12 of the world’s most important sectors:
asset management, automotive, banking & capital markets, biotechnology, consumer products,
insurance, media & entertainment, oil & gas, pharmaceuticals, real estate, telecommunications
and utilities. These sector studies served as the primary source for the overall comparative report
of our findings.

S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS

Contents
The Ernst & Young Strategic Business Risk Radar 2

Scanning the Sectors 3

The Top 10 Risks for Business 8

– Regulatory and Compliance Risk 8
– Global Financial Shocks 10
– Aging Consumers and Workforce 12
– Emerging Markets 12
– Industry Consolidation/Transition 15
– Energy Shocks 15
– Execution of Strategic Transactions 17
– Cost Inflation 17
– Radical Greening 18
– Consumer Demand Shifts 18

The Next Five 21

Conclusion 26

Contacts 28

1
The Ernst & Young Strategic
Business Risk Radar
Strategic Risk (str_-t_‘j_k r_sk)
– a risk that could cause severe
financial loss or fundamentally
undermine the competitive
position of a company.
Macro Threats
eats
Th r
tor
c hre
Se
2 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS
We have found the use of the radar – our risk radar –
to be a simple and useful device to allow us to present
a snapshot of the top 10 strategic business risks for
a company, a sector or indeed the global economy as
a whole. The radar allows us to show both the scale of
the challenge and its nature.
To arrive at our findings, we worked with Oxford Analytica to interview more than 70
analysts from around the world and from over 20 disciplines that shape the business
environment, including law, finance, the sciences, business strategy, geopolitics, regulation,
medicine, economics and demographics. The focus of our interviews was to identify the
emerging trends and uncertainties that will drive the fortunes of leading global businesses
over the next five years.
Our interviews were open-ended in that we did not provide a list of pre-determined risks
for the analyst to rate. Rather we asked each analyst to tell us what he or she believed would
be the most important strategic challenges for global business ahead. Many different risks
and challenges were identified, with in excess of 40 by more than one analyst. In order
to prioritize the top risks for each sector, panels of sector experts including journalists,
researchers, advisors and our own Ernst & Young practice professionals rated the severity
of each of the risks for the sector concerned.
The risks that appear at the center of the radar are those that our panels believed will pose the
greatest challenge to business in the coming year. Those on the outer edge – whilst not small
and still in the top 10 – are considered to be of slightly lower priority.
It rapidly became clear that not all strategic business risks are the same in nature. We have
therefore also divided the radar into three broad sections: (1) macro threats that emerge
Operatio
from the general geopolitical and macro environment in which we all operate; (2) sector
threats that emerge from trends or uncertainties that are re-shaping the specific industry;
nal
and (3) operational threats that have become so intense that they may impact the strategic
ats performance of leading firms. We believe this distinction is helpful, whilst recognizing that
these categories are not completely exclusive. Hence, we can present one radar for a company
or sector, as collectively, these are the principle strategic risks that industry-leading firms
must manage if they are to maintain their dominant competitive position.
FOR B USINESS
Scanning the Sectors
Risk Weighting and Risk Prioritization
Phase 1:
• We asked the pool of analysts to list
and to rate (on a scale of one to ten,
with one having the least impact),
the 10 most significant trends or
uncertainties that may impact
companies, and to provide commentary
on why these are important to
their industry.
We have assumed that a ‘scan’ is or should be the most
appropriate collective noun for the resulting grouping of
strategic business risk radars and present (overleaf) the
results of this analysis for each of the 12 core sectors.
We hope that what is immediately clear is the extent of variation between these 12 radar
snapshots. The most significant strategic business risk is different for most of them and the
nature of those strategic business risks is varied for all of them.

• Analysts were then asked to list the Variation in Risk

five most significant business risks Close examination of the radars – individually and collectively – shows that there is no
to firms within their industries – consistent list of top 10 strategic business risks faced by the sectors. It is not just the weighting
considering in particular those of a of risk that varies, but the positioning and the nature of risk. Moreover, it is not just the sector-
strategic nature – that might bring specific risks that vary, but the macroeconomic and operational risks as well. This does not
about shifts in the industry or put surprise us or any who recognize the importance of sector in determining business challenges.
leading firms in peril of losing their
Variation in Significance of Risk
position. A numerical rating was
We have highlighted one of the most significant strategic business risks – regulation and
applied from one to five.
compliance – in red. This makes it easier to see that for four of the sectors – real estate,
Phase 2: biotechnology (biotech), pharmaceutical (pharma) and banking and capital markets –
this is perceived as one of the top strategic business risks. Three other sectors – consumer
• In order to prioritize the top risks for
products, media & entertainment (M&E) and automotive (auto) – believe that the same issue
each sector, panels of sector experts
barely makes the top 10 of their strategic risks.
including journalists, researchers,
advisors and our own Ernst & Young Equally, a fundamental shift in consumer demand (marked in green) is a top risk for consumer
practice professionals rated the severity products and media & entertainment, but barely features for four of the other sectors.
of each of the risks for the sector
concerned. Panelists were asked to
assign a numerical severity rating,
from one to five, based on the likelihood
that a risk issue would lead either to
severe financial impact or undermine
the competitive standing of the leading
firms in their sector. The ratings
assigned by each sector panelist were
averaged to build the lists of top risks
by sector.
• The risks that were rated as having the
greatest impact across the largest
number of sectors were identified as the
‘top 10 risks for global business in 2008.’

3
The Ernst & Young Strategic Business Risk Radars

Asset Management Automotive Banking & Capital Markets

Macro Threats Macro Threats Macro Threats

Environmental
pressures
Geopolitical or Workforce aging and Geopolitical shocks
macroeconomic Fuel price escalating legacy costs
Global financial shocks shocks Global financial
Innovation away Difficulty of Global market
shocks developing retail Compliance liberalization shocks
from traditional
asset managers competencies Consolidation, risks and consolidation
Entry of restructuring
private equity and poor execution Cost controls and Credit shocks
of M&A cash flow pressures and exposures
Polarization between alpha
and beta business models Compliance and
Cost and Consumer demands regulatory risk Reputation risks
Opera

Opera

Opera
Rise of financial pricing controls
eats

eats

eats
conglomerates as Changing needs of Emerging markets Increasing pressure
asset gatherers an aging population on margins IT risks
t

t
Thr

Thr

Thr
i

i
o

o
nal

nal

nal T
r

tor

tor
o

Th

Th
ct

hre
Growth of Poor execution
Se

e
re

re
S

at at S at
alternatives of M&A s Failed product s s
launches Competition from
non-bank banks Corporate governance
and specialists and internal
controls failures

Biotechnology Consumer Products Insurance

Macro Threats Macro Threats Macro Threats
Geopolitical or Legal risk
macroeconomic shocks

Emerging markets
strategies Demographic shifts
Catastrophic events in core markets
Regulatory Monitoring drug safety Supply chain risks
compliance Pricing pressures
Price pressures Raising capital and input price risks Integration
Harnessing and access Managing Climate change of technology with
emerging Product sourcing operations and strategy
markets development strategies Securities
Strategic alliances and innovation markets Emerging markets
and transactions Marketing
Opera

Opera

Opera

Demonstrating and branding

eats

eats

eats

Product development
value and clinical trials Regulatory intervention
Consumer
t

t
Thr

Thr

Thr
i

Cutting edge IT
o

Strategic demand
nal

nal

nal T
r

tor

tor

transactions shifts
o

Th

Th
ct

hre
Se

Protecting
re

re
S

at at Channel distribution at
intellectual Accessing talent s s s
property
Shifting regulatory threats

Indicates regulatory and compliance risks

Indicates consumer demand shifts

4 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS

Media & Entertainment Oil & Gas Pharmaceuticals
Macro Threats Macro Threats Macro Threats
Energy conservation
Backlash against Supply shocks Global pandemic
globalization Demand shocks

Asset protection risks

including piracy and digital Climate concerns Uncertain energy policy
intellectual property rights
Managing the infrastructure Competition for Adverse drug effects
Consumer demand of new business models reserves from NOCs Regulatory risk
shifts Product diversion
Human capital deficit and parallel trade War for talent
Business model Worsening Product pipeline
Opera

Opera

Opera
M&A activity innovation fiscal terms
eats

s
Inability to Price controls and
reat

reat
and entry of
private equity control costs Possible overriding reimbursement levels
tion

tion

tio
Thr

of intellectual
r Th

r Th
Cost controls

n
Emerging markets property rights
a

a
tor

Political constraints
o
l Th

l Th

l Th
t

t Cost pressure
c

ec

on access to reserves ec
e

re

re

re
Corporate
S

governance and
at
s
at
s S at
s
Maturation of internal controls Drug counterfeiting
key markets

Real Estate Telecommunications Utilities

Macro Threats Macro Threats Macro Threats
Geopolitical shocks Volatility in Cost or
emerging markets accessibility
of capital
Globalization of Energy
Global economic and markets and services politicization
Climate change/ Damage or
market fluctuations Failure to
Inability to find generate sustainable Inappropriate environmental awareness disruption losses
Increased complexity and exploit global revenues from new processes and
of real estate finance and non-traditional Technological systems to Entry of infrastructure
shifts business models and private equity
opportunities support new
business strategy Challenges
Shakeout of real Decline in of scale
Green revolution estate finance Regulatory fixed and Inability to respond to
risks mobile voice market liberalization
ARPU
Opera

Opera

Opera

Rise of Inaccuracy in
Access to
eats

Regulatory and forecasting returns

reat

reat

private equity compliance risks competitively priced

Consolidation from infrastructure
tion

tion

tio
Thr

long-term fuel supplies

r Th

r Th

and M&A investments

n

Strategic exploitation
a

a
tor

o
l Th

l Th

l Th
t

of monopoly advantages
c

ec

ec

Competition
e

re

re

re

by incumbent firms
S

at from internet
at at
Infrastructure s Privacy and s Compliance and
s
investment challenges companies security risks regulatory risks

Indicates regulatory and compliance risks

Indicates consumer demand shifts

5
 Two of the sectors did not perceive a single macroeconomic threat...
oil & gas and insurance, however, perceive that half of their top 10 strategic
business risks are macroeconomic in nature.

Different Types of Risk

It is also apparent that the nature of risk varies considerably between the sectors. Analysts in
two of the sectors – biotech and consumer products – did not perceive a single macroeconomic
threat as being in the top 10 strategic business risks, but were focused entirely on operational
or sector-specific challenges. By contrast, the oil & gas and insurance analysts we interviewed
indicated a much greater exposure to the global environment, and at least half of the top 10
strategic business risks for these sectors are macroeconomic in nature.

Some sectors are undergoing dramatic transformation. In industries such as telecoms and
media & entertainment, sector-specific challenges dominate the risk lists. Technological
advances are driving change in the basic business models of many firms in these industries.
In five other sectors – auto, asset management, biotech, consumer products and pharma –
the analysts indicated that half of the most significant strategic business risks are specific
to their sector.

This analysis highlights the importance of sector in driving strategic business risk analysis and
management action. Hence, we have produced separate reports exploring strategic business
risk in detail for each of these 12 sectors. (Contact information for each report can be found
on page 28).

Given the observations above, what conclusion, if any, can be drawn from the aggregation of
these sector findings? We believe that there are two sets of valid conclusions to be drawn:

Firstly, we believe that, because we have followed a consistent process and used a weighting
system, it is possible to compare the riskiness of sectors one with another.

Secondly, from consolidating the findings of the 12 sector studies, it is possible to form a
view of the 10 most important strategic risks across these sectors and hence for the economy,
and this is the focus of the bulk of this report.

6 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS

Identifying the Global Top 10
By consolidating and aggregating the findings of our 12 sector studies, it is possible to form
a view of the 10 most important strategic risks across the sectors – concerns that will be
common to leading firms in many industries.

The table below shows the weighting of the top 10 strategic business risks across the 12
sectors that we studied. While many risks were unique to a sector, a few key challenges had
a high or critical impact for many, or even all of the sectors. Hence the risks at the top of the
chart are those that, according to the analysts we interviewed, will do the most to influence
markets and drive corporate performance in 2008 and beyond.

Our analysis would suggest that the sectors that broadly have the greatest exposure to the top 10
strategic business risks are automotive (auto) and real estate, with four critical strategic business
risks each. Media & entertainment, utilities, banking & capital markets and biotech follow with
three of the top 10 risks rated critical within their sectors. At the other end of the spectrum,
pharma had only one of the top 10 strategic business risks marked as critical in its top 10 risks.

This cannot, however, be used to definitively conclude that one sector is more or less risky
than another. It may be that the unique sector-specific factors are in themselves more high
risk than these 10. However, we can infer that, compared with what we believe are the most
common strategic business risks, some sectors are more exposed than others.

Industries
Estate
Real

Biotechnology

Pharmaceutical

Insurance

Utilities

Entertainment
Media &
ications
Telecommun-
Oil & Gas
Capital Markets
Banking &

Management
Asset

Products
Consumer

Automotive

1 Regulation and Compliance

2 Global Financial Shocks

3 Aging Population

4 Emerging Markets

5 Consolidation/Transition
Risks

6 Energy Shocks

7 Strategic Transactions

8 Cost Inflation

9 Radical Greening

10 Consumer Demand Shifts

Key
Critical Impact
High Impact
Medium Impact
Moderate Impact

7
The Top 10 Risks
for Business
In the following section, we explore the top 10 strategic business risks that have emerged
from our study, and we share the thinking of some of the leading analysts to whom we
have spoken.

Top 10 Strategic Business Risks Macro Threats

1 Regulatory and Compliance Risk

Energy shocks
2 Global Financial Shocks
3 Aging Consumers and Workforce Global financial shocks

4 Emerging Markets Industry consolidation/transition

Execution of
strategic transactions
5 Industry Consolidation/Transition
Regulatory and
compliance risk
6 Energy Shocks

Opera
7 Execution of Strategic Transactions Emerging markets
ts

Aging consumers
hrea

8 Cost Inflation and workforce

tion
T

9 Radical Greening Radical greening

a
r
cto

Cost inflation
l Th
e

10 Consumer Demand Shifts Consumer

re
S

demand shifts
at
s

1 Regulatory and Compliance Risk

As the greatest strategic challenge facing leading global businesses
in 2008, the industry analysts we polled selected Regulatory and
Compliance Risk. This is being driven by an escalating regulatory
burden in many markets, as well as numerous compliance challenges
as companies extend their value chains well beyond Europe,
North America, and the BRICs (Brazil, Russia, India and China).

The possibility of regulatory intervention in sectors such as pharma,

biotech, insurance, telecoms and utilities, is further elevating this risk.
Such intervention could shape the competitive environment and drive
fundamental change in business models. One telecoms analyst wrote,
“Regulation has a tremendous effect on the competitive landscape,
not only between incumbents and new entrants, but between
countries.” In other sectors, the continued viability of current
business models may be threatened by future regulatory decisions.
Continued on page 10

8 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS

Beyond the Horizon: Forward-looking Risk Management
Jim Fanning
Ernst & Young
There’s never been a more challenging
time for banks and capital markets firms.
The complexities of the business continue to
multiply. The landscape keeps changing through
globalization, the emergence of new markets,
and the advent of cross-border expansion.
Add to the mix ever-evolving risk management,
regulatory, and compliance requirements and it’s
easy to see why many senior executives spend
their days scrambling to keep pace and their
nights worrying about whether or not they are
fully compliant and can meet expectations.
The concern is not unfounded. Many of the
largest institutions have multiple risk governance
processes and infrastructures amongst various
corporate and business units. Because these
operating models have sprung up over time as
needs dictated, they often operate in silos,
leading to substantial inefficiencies.
These models may prove to be insufficient
tomorrow as cross-border consolidation
adds another layer of complexity. Competing
regulatory regimes and variances in compliance
requirements are just a few of the ways in which
the demands and challenges of risk management
will be compounded. At the same time,
companies will be expected to provide greater
transparency and more accurate risk and control
information. Institutions can prepare themselves
today to effectively manage the risks inherent in
this future scenario by aligning or “converging”
their current risk and control processes.
Risk convergence allows organizations to • Is there buy-in from the right stakeholders?
coordinate the various risk and control Support from chief executives is important,
processes, effectively and pragmatically. but getting buy-in from key corporate control
In our experience the result is reduced groups and business units is critical: they’re
redundancy, which drives down costs, and, the ones that will make it work.
perhaps most importantly, allows more
• Can expected benefits be tested? The goal
comprehensive, enterprise-wide risk
here is to support the future-state hypothesis
reporting to senior management and
with empirical information in order to build
the board. While risk convergence is not
a compelling case to present to senior
a minor undertaking, it represents a major
management and the businesses.
opportunity to more effectively mitigate
current and future risks that otherwise With an eye on what the future operating model
could impact an institution’s reputation, should look like, it’s possible to move toward the
bottom-line and ability to compete globally. desired end-state in incremental steps. As each
building block is put in place, efficiencies are
A few, forward-thinking institutions have
gained and begin to multiply. This approach can
recognized this need to streamline risk and
maximize the return-on-investment in the short
control processes and present a more
term by avoiding large-scale investment while
consolidated view to senior management and the
reducing waste and process redundancy. In our
board. Consequently, they are beginning to take
experience, those financial institutions that
steps toward risk convergence. It’s uncharted
embark on this journey may be rewarded with
territory, however, so few, if any best practices
a flexible, efficient, and sustainable risk
have been established. A critical foundational
management framework that effectively
element is the creation of a common data
meets not only today’s requirements but
structure, common terminology for risk and
those of the future.
control process, and a common technology
architecture. In addition, the following questions  Jim Fanning is the Global Leader of
can also help to guide the process: Ernst &Young’s Banking & Capital
• Has the vision been clearly defined? It’s not Markets Center.
sufficient to focus only on what’s not working.
The future state-vision should be well-defined
and communicated so that all parties are
clear on what is to be achieved.
• Has a responsibility matrix been
established? A matrix of current roles
and responsibilities helps to visually
identify existing duplication of risk
management resources.
9
 “ The failure of one or more major financial institutions
remains a real worry and could turn the crisis into
systemic failure in the year ahead.”
Jens Tholstrup, Oxford Analytica
Continued from page 8
One analyst noted, “The revenue generated from the US pharma
market, the largest in the world, enables pharma companies to
remain profitable [despite] strict price controls in other major
markets and the inability of [customers] in developing markets to
pay full prices for their products. If imposed in the United States,
price controls could transform the global pharma market, including
business models and the development of new drugs in the future.”
The compliance challenges are particularly strong in highly
regulated industries such as banking, insurance, pharma, and
biotech, where the regulatory burden is increasing fast, and where
firms are feeling pressure to demonstrate a return on investment for
long-term risk management initiatives. One banking panelist noted,
“Banks are experiencing significant fatigue around managing the
myriad of often redundant compliance and regulatory reporting
activities, the cost of which is massive and burdensome.” Similarly,
a biotech analyst wrote, “A mounting regulatory compliance burden
in areas such as privacy, post-marketing monitoring of drug safety and
sales force compliance… poses a management and internal controls
challenge to biotech companies.” Increasingly, companies may seek
risk convergence initiatives which allow them to coordinate the various
risk and control processes, reduce redundancy, which drives down
costs, and, perhaps most importantly, more comprehensive enterprise-
wide risk reporting to senior management and the board.
As companies become more and more global, compliance becomes
a greater challenge, forcing them to manage diverse regulations
in different markets. A specialist in business strategy noted,
“Managing regulations in 10 jurisdictions is one thing. What happens
when a firm has significant markets in 30-40 countries at varying
levels of development and with very different regulatory traditions?
This is not to say that global regulatory [diversity] is necessarily
increasing; but rather, that corporate exposure to existing [diversity]
is increasing.” The importance of understanding local regulations,
as well as major global industry regulations is crucial to those
companies expanding their global reach.
10 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS
2 Global Financial Shocks
Our analysts acknowledged that few sectors would escape the
impact of major Global Financial Shocks. Biotech and utilities
firms, for example, would have trouble raising capital; banking,
asset management, and insurance companies would be likely to
suffer direct losses from market movements; and after making
high-cost exploration investments – oil & gas companies might
suddenly find themselves facing low prices if the global economy
moves into sudden recession.
Since our research began earlier this year, the August credit crunch,
forced by the US sub-prime mortgage crisis has provided a real-life
demonstration of how highly contagious such shocks can be across
sectors – and indeed – globally. Rory MacLeod, the former Head
of Global Fixed Income at Baring Asset Management, somewhat
predicted in April 2007 that if there was a “worldwide credit crunch
– spread widening would not lead to bank collapses, as in the past,
but would be spread throughout the financial system. There will be
unexpected pockets of vulnerability. Disintermediation has replaced
international banking as a finance source with a range of specialized
credit instruments held widely, with risk exposures that regulators
find it difficult to assess. A credit shock could lead to a temporary
closing of the market for new credits, while traditional lenders such
as banks have moved away from the area.”
A crisis could spread from alternative investment vehicles such
as hedge funds or private equity. One analyst wrote, “Financial
innovation and structural changes have contributed to the success
of private equity, but cyclical factors have also played an important
part in their over-expansion… High-profile failures of some investee
companies could lead to a loss of confidence among investors and
lenders.” Another remarked, “A crisis in CDO/structured finance
markets could lead to potential systemic problems. Sustainability
of financial sector growth is more fragile than markets realize.
There is the potential for dramatic fallout from excessive leverage.
Carry trades are cited as a risk area, but other hedge fund strategies
are exposed to a change in the macroeconomic environment.
There are potential systemic issues in the financial sector.” In the
future, continued financial innovation – which tends to disperse
risks and, as a consequence, makes the detection of potential
shocks more difficult – is likely to increase the potential for
financial shocks.
FOR B USINESS
The Credit Crunch and Its Implications for the Availability of Capital
A related issue that has made the sub-prime The implications are:
crisis more contagious is the use of pooling of • Even in the event of central bank rate cutting,
financial assets. Any investment vehicle which the cost and availability of credit for most
has some exposure to sub-prime mortgages will borrowers will be negatively impacted for the
be regarded as contaminated. year ahead. Banks will be forced to ration their
In this market environment, financial institutions lending and lower-rated borrowers will find
become very wary of lending to other financial access to capital difficult and expensive.
Jens Tholstrup
Oxford Analytica market players since they will be concerned that • The capital markets may well provide better
others will be holding impaired assets. Credit for fund-raising opportunities especially if
For the time being the world’s major central
all but the largest and most secure borrowers investors believe that the anticipated rate
banks have eased the credit crunch that
will seize up. This is precisely what has happened rises will be reversed. However, access is likely
manifested itself in the beginning of August,
in recent events, where central banks have had to be restricted to better credits for some
but the risks to the financial system remain
to intervene and act as lenders of last resort. time at least.
very real.
Any institution that is holding high-risk assets, • The funding of off-balance sheet assets and
The origin of this financial crisis has been well
particularly asset-backed or pooled vehicles, other structured finance products will become
documented: the inability of large numbers of
is facing substantial losses. In addition, the severely restricted.
less creditworthy borrowers in the United States
market for many securitized assets has dried
to service the debt on their home mortgages.
up leaving the holder unable to sell the assets.  Jens Tholstrup is an Executive Director and
What has made this development so contagious Director of Consulting at Oxford Analytica.
The commercial paper market for asset-backed
are certain innovations in the global financial
securities has all but dried up with the Prior to joining Oxford Analytica
system. The securitization of financial risks has
consequence that borrowers financing such in 2000, Jens had an extensive career
resulted in a wide disbursement of such risk
assets will need to draw on standby lines of in investment banking.
throughout the financial system. In theory,
credit provided by banks.
the dispersion of risk should reduce the risks
of systemic failure but, in fact, the very opposite Contingent risks become real risks, underwriting
has been the case. positions become stuck and credit becomes
severely restricted. The failure of one or more
The negative effects of disbursement are
major financial institutions remains a real worry
exacerbated by lack of transparency. In theory,
and could turn the crisis into systemic failure in
all financial assets have been, or are capable of
the year ahead. The central banks and regulators
being securitized and traded. However, at the
have already shown their disposition to take
present moment, no regulator or market
the steps which they feel are necessary to
participant can be totally clear where the risks
maintain the stability of the financial system
lie. The use of off-balance sheet vehicles to hold
and in particular to minimize the likelihood of
sub-prime and other risk assets, has further
economic contagion.
reduced transparency.

11
 “ Only 41% of developed market companies have a risk strategy
for emerging markets, with more than half (56%) saying that
no strategy is in place.”
Ernst & Young, Risk Management in Emerging Markets study, October 2007
3 Aging Consumers and Workforce
An increasing strategic risk for the majority of industries is the
threat posed by workforce and consumer aging. Sectors such as
asset management and insurance are experiencing dramatic shifts
in demand and competitive battles are being fought for savings
products that will appeal to the growing group of older consumers.
Other firms, for example, those in the auto sector, are facing severe
competitive challenges as a result of their aging workforces.
A number of industries are experiencing dramatic shifts in demand –
often dramatic growth – as a result of the rising average age in,
for example, Europe, North America, and Japan. Sectors most
affected by these shifts include pharma, biotech, consumer products,
insurance, and asset management companies, which could lose
heir competitive edge if they cannot effectively respond to these
new opportunities. One insurance panelist noted, “People reaching
retirement age have very different financial needs.” As a result,
a struggle is now emerging between insurance and asset management
firms to deliver the innovative products that will meet these needs,
such as income maintenance and health care spending. To be
competitive, companies will need to gain an understanding of the
specific needs of these new consumers, and many will need to have
an aggressive approach to key competitors that may increasingly
come from outside their sector.
The other strategic challenge posed by an aging population is
workforce aging, a risk issue that figures highly in oil & gas and
is perceived to be a ‘next five risk’ for sectors such as banking.
These sectors are already experiencing a significant human resource
challenge. Perhaps the most extensive example of this threat can be
seen in the US auto industry, which is particularly weighed down
by pensions and health care costs. “There remains a possibility of
insolvency in the US auto industry, and a long line of dependent
component companies have yet to construct a path to safety.”
12 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS
4 Emerging Markets
The findings of our survey Risk Management in Emerging Markets
2007 reveal that, while many companies have been in these markets
for some time, emerging markets remain dynamic for developed
market (DM) companies. Over 60% of DM companies have been
in these countries for less than 10 years, and almost 20% less than
two years. In most cases, global firms are competing with other
global players for opportunities in these markets, although in
several sectors, emerging markets firms are themselves entering
the global stage.
Often companies are being driven to these markets by the saturation
of existing markets. An analyst in consumer products commented,
“Over the next few years nearly all of the increase in world
population will take place in the developing countries. In the
meantime, other established markets will reach maturity.” Similarly,
in real estate, “Intense competition for a limited pool of desirable
assets, combined with yield compression in most global markets,
has resulted in real estate funds needing to broaden their geographic
search for opportunities. This has created an increased number of
competitive variables in real estate markets.”
For other sectors, such as biotech and consumer products,
emerging markets offer supply chain advantages. One biotech
analyst remarked, “The sources of biomedical innovation will
become more diverse in a globalized marketplace. The implication
is that while, in the past, the main source of competitive advantage
for firms throughout the industry has been technology, in the
future it will be the supply chain. Global companies will need to
partner/form networks with firms in many markets.” In many
sectors, the value chain will increasingly extend well beyond the
developed markets and the BRICs, and the volume of business
conducted in these markets will be significant.
On the downside, global expansion into foreign and/or emerging
markets has always carried with it traditional threats such as:
currency, operational, regulatory, language, and cultural risk.
Increasingly, a significant challenge lies in firms effectively
managing outsourced business and supply chains in these markets.
Recent events in the consumer products sector, for example,
have demonstrated the specific need to focus on quality control
standards and compliance testing when sourcing from relatively
unknown suppliers in emerging economies.
FOR B USINESS
Winning the Battle for the Savings Market
Chris Raham
Ernst & Young
Changing Financial Needs
The baby boomer generation is retiring just as
employers and governments are progressively
disengaging from pension provision. As a result,
the financial needs of individuals are changing
dramatically. The central financial challenge for
these retiring baby boomers is how to transform
the wealth they have accumulated in their pension
accounts into a steady income stream. To a large
extent this is a decision that they will have to
face alone.
The vast majority of baby boomers have only three
assets: house, occupational plans and social
security. With the exception of the high net-worth
segment, the value of additional savings is
minimal. These trends will transform the savings-
products industry, which so far, has been
accumulation-oriented. The business challenge
over next 15-20 years will be to create products
for the pay-out phase.
The strategic risk for insurers is their inability to
adjust, develop products for new needs, and
compete against other sectors of the financial
services industry.
How Can Insurers Capitalize on
New Opportunities?
Occupational pension/cash-balance plans, and
individuals in the mass market offer significant
opportunities. However, these benefit only a
segment of the population – those without
sufficient wealth to attract the assistance of wire
houses, retail advisors or independent financial
planners. Only a handful of competitors are
offering well-planned, valuable services to
these segments, although most major financial
institutions are circling the opportunity.
• In the defined contribution market,
insurers should offer employers products that
combine the accumulation and payout phase.
These products transfer most of the risk from
the individual to the insurance company.
Combining the two phases can represent a
competitive advantage. At present, the asset
management industry has the capability to
offer only investment products.
• To sell against investment-only solutions,
insurers must have the ability to provide key
constituents with clear information about
product benefits and competitive advantages
from the employee’s perspective. Such
assessments will help employers and their
benefit consultants understand the value of
the product. Insurers may also support the
plan sponsor by providing financial advice
to employees.
• In the retail market, insurers must take steps
to leverage their ability to write contracts that
will provide more dollars of lifetime income per
dollar of investment. A retirement program that
combines decisions around the timing of social
security elections, the use of home equity, and
the disposition of cash balance plans into an
easy-to-use, cost-efficient menu approach will
be effective in the mass market.
Barriers to Success – the Threat
of Competition
To be successful, insurers must change their
approach to the competition and take a broader
view of the market. For years, they have been
focusing on competition among themselves. In the
US, for example, insurance companies have only a
small share of the US savings market. Their true
competition is represented by other providers
of savings products, in particular, mutual fund
entities. Insurers must become as aggressive as
other institutions competing for the same dollar.
As the only writers of payout annuity products,
insurers should be well positioned to take
advantage of the shift from accumulation
to payout. However, they face three
significant obstacles.
• Most of the retirement wallet is now in the
hands of other asset managers, who are in
a strong position to retain customers.
• Even though pay-out annuities provide
the most income for a given investment,
individuals dislike the idea of suddenly
transferring all of their assets to the insurance
company. They feel that they are losing
control over the wealth and they would
prefer to keep the money with the insurance
industry’s competitors.
• Some sales practices related to deferred
annuities, have created negative sentiments
that have been actively expressed in popular
media and by regulators.
Twenty five years ago, insurance companies were
strongly positioned against asset managers to
dominate the savings industry. Mutual funds were
vulnerable and their market share was relatively
small. However, insurers were complacent and
lost the battle for individual retirement assets.
The demographic shift is creating new demands
that insurers are well-placed to satisfy. It would
be a shame for insurers to repeat the same
mistake and squander their opportunity to
recapture lost territory.
 Chris Raham is a Senior Actuarial Advisor
at Ernst &Young.
13
 “ These [emerging] markets can see growth of up to 40 to 50% per annum.
In such an environment, local entrepreneurs have an advantage,
and right now, a lot of local media companies are beating the global
players in China and India.”
Farokh T. Balsara, Ernst & Young
From Emerging Markets to Surging Markets – The Future of Global Media Growth
Farokh T. Balsara
Ernst & Young
Emerging markets are attracting significant
attention because of a surge in demand
for content. With China and India accounting
for one-third of humanity, these markets
are the future for global media growth.
Currently, some of the largest global media
and entertainment companies are making less
than 5% of their global sales from emerging
markets, but the management within these
companies are spending a disproportionate
amount of their time dealing with these markets.
It is partly a lack of both content and a
handle on distribution in Europe and North
America that is preventing emerging market
companies from moving into developed markets.
More significantly, however, the growth in their
home markets is so fast that they don’t have
the bandwidth to think about it.
Another important growth factor in these
markets is technology. Broadband connectivity
in South Korea is 98%, enabling the push-
through of huge amounts of content. In India,
a global multinational company has recently
conducted the world’s biggest rollout of
digital cinema through satellite. This means
that these companies can control exactly
where movies are showing and how many times
they are shown. It also means they can control
piracy. And it allows them to release not just
in Delhi or Mumbai, but in the smallest towns,
simultaneously. This is a paradigm shift in how
14
films are released, and it is happening in India. The price points in emerging markets are also
At a time when technology is reshaping the often a fraction of what consumers would be
global industry, emerging markets are the charged for similar content in developed
fastest adopters of technology. They provide an markets, often due to regulations, competition
ideal test-bed where global firms can trial new or extensive piracy. However, the huge and fast
technologies, before bringing them out in their growing volumes more than make up for the low
home markets. charges. As a result, a thorough assessment of
the market and distribution channels is needed
Winning in Emerging Markets
to appropriately price the content.
To win in these markets, companies need to
localize content and be sensitive to local culture, A final critical success factor is flexibility.
rather than automatically dubbing and These markets can see growth of 40 to 50%
repurposing. It is possible to sell from media per annum. In such an environment, local
libraries, but this will not make you a winner entrepreneurs have an big advantage, and right
in these markets. One major global media now, a lot of local media companies are
player had been in India for seven or eight beating the global players in China and India.
years, with a mostly English offering. In 2000, Multinationals will need to have flexible business
they invested in 24-hour Hindi programming with plans which do not always need to be approved
local productions and quickly became the largest by the regional office and the head office.
 Farokh T. Balsara is the National Sector
and most profitable channel. Firms that don’t
localize their content can also run higher risks. Leader for Media & Entertainment and
One foreign broadcaster that was in the Indian the Markets Leader for Advisory Services
market showed too much adult-oriented content at Ernst &Young, India.
in its programming before 11pm and the
government took the channel off the air.
However, growth in demand for local content by
these global players and by local companies
funded by private equity firms could soon
outpace the growth in supply of local production
talent. This could lead to super-inflation which
should be factored into business plans.
It is important to understand that even a
single emerging market country has multiple
markets within. Southern India is completely
different from the North. To win in a national
market, investors may need a very different
strategy in each region. There will be differences
in where the demand is, the type of content,
the distribution of content, and how to take
out earned revenues.
S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS
 5 Industry Consolidation/Transition
Part of the consolidation phenomenon has been driven by the global
M&A boom, which several analysts believe may slow in years
ahead. However the majority of sector analysts we polled believed
that industry transition would continue to pose a key strategic
challenge in 2008.
This continued transition will be driven, in most sectors,
by underlying structural trends. One analyst, commenting on the
auto sector noted, “Population growth and GDP growth are highest
outside of the US, EU, and Japan, resulting in a global misalignment
in the location of industry capacity and the location of demand.
The industry, especially in the US market, is in transition including
consolidation, restructurings and spin-offs.” Another analyst
highlighted that, in asset management, transition entails the
migration of the industry’s leading firms towards one of two
opposing business models, “On the one hand, massive asset
gathering [companies] that drive down costs and provide cheap
access to markets and market risk and, on the other, those companies
that… (as a business proposition) offer better-than-market returns.”
In the media & entertainment sector, M&A is a central feature
of many companies’ attempts to respond to the internet’s impact
on the sector, for example, via the acquisition of ‘new media’ firms.
Companies in other sectors may continue to merge, driven by
competitive pressure. In banking, “Many of the deals are of sizes
never-before experienced. The trend to become bigger and more
dominant by acquiring existing franchises is an ongoing driver for
growth.” And in telecoms, “Accelerated M&A trends in the telecoms
industry will lead a transition to three to four players per country.”
In utilities, one analyst commented, “Size is vital when negotiating
with the owners of major primary resources; size is vital as some
protection against hostile acquisition. Hence, the impact of failing
to grow can be a loss of competitive supplies or even loss of the
business.” There is a growth imperative in many sectors, and if
it cannot be met by organic growth, then it may need to be met
by acquisitions.
6 Energy Shocks
Fluctuations in energy prices and access to supplies pose a clear
challenge to the energy sector, including utilities and oil & gas.
In utilities, for example, loss of access to competitively priced
long-term fuel supplies is the top strategic risk. One analyst noted,
“The impact on the business is the need to acquire short-term
supplies to meet demand obligations and can lead to a huge loss
of profitability, hence the need for skilled hedging of sources,
types and timing of fuel supplies.”
However, beyond the energy industry, a large swing in prices could
also trigger economic shocks that could impact sectors such as
insurance, consumer products and real estate. Few leading global
companies are immune to this risk. One telecoms analyst remarked,
“As more and more equipment is racked up in data centers, more and
more power is needed to run and cool down the servers that are at the
heart of the web infrastructure.” Even the virtual world needs ‘real’
world energy.
Various potential causes of such energy shocks were noted, including
a US strike on Iran, a breakdown in relations with Russia, contests
for control of ‘strategic’ energy supplies, or an action to disrupt
shipping through one of several key maritime choke points. The risks
of a shock are also dramatically heightened in today’s environment of
increasing energy nationalism. One analyst noted that on the supply
side, “The development of the world’s oil & gas supplies over the past
40 years, with concomitant advances in extractive technologies, has
been undertaken largely by private sector enterprises. Now, however,
the global supply of prime energy fuels has become dependent
on a few national, state-owned suppliers.” In the future, the risks
associated with the continued and sustained supply of such fuels
to the developed world may rise significantly. On the demand side,
the risks from rising energy nationalism may be even greater,
“Governments are increasingly convinced that energy security needs
to be pursued actively. The reality may be quite different, but the
perception could trigger a crisis [caused by] desperate efforts that
countries may make to secure their supplies (paying above market
rates, long-term deals, etc.). If markets then panic, this would
cause governments to respond with even more uncoordinated,
unilateral steps, making the situation infinitely worse.”
15
 “ New technologies will change the market. The successful utilities of
the future will be those who make the bold decisions to flex their assets,
supply chains, and operating models.”
Tony Ward, Ernst & Young
A Loss of Access to Fuel Supplies – Mitigating the Risk
Tony Ward
Ernst & Young
Whilst global primary energy prices remain
volatile, power utilities remain generally
high-volume, lower-margin operations.
The primary risk for utilities is to balance
relatively short-term customer contracts with the
longer-term nature of fuel supply and, in doing so,
deliver access to economically attractive, secure
and reliable contracts, whether for their primary
fuel needs, or eventual customer off-take. In part,
this is a matter of trading strategy, procurement
and hedging, but the choice of technology to
convert fuel to power, is also a key issue.
Decisions made today to embed fuel needs,
emissions profiles and cost drivers may have
long-term implications. These assets can have
economic lives of up to 50 years, and investment
lead times of over five years, as is the case with
some coal and all nuclear assets.
The interaction of these two short and long-term
pressures is mirrored in the convergence of the
respective interests of the private sector utilities
and national governments – the former managing
their discrete businesses for profitable growth
on behalf of their shareholders, and in
competition with others, and the latter
focusing on the aggregated concerns of
diversity and supply-security of fuels,
minimal environmental impact and overall
national economic competitiveness.
16
Managing the Risks for Contracts and
Fuel Supplies
Securing access to fuels and supply contracts
for a utility carries with it substantial risks and
uncertainties. This is true both in mature markets
with an aging infrastructure and greater
competitive pressures, and in developing
countries that may struggle to match
generation capacity to rapidly growing demand.
In committing to asset construction programs,
companies face significant regulatory, market,
financial, and public relations risks. Access to
adequate amounts of capital at reasonable rates
may also be a factor as the industry enters a
period of escalating infrastructure investment.
The effective management of the risks
associated with pursuing organic growth will
enable utilities to deliver predictable value
to shareholders.
Being flexible is the key to success for both
governments and companies. At a national level,
certain countries are responding by moving
towards greater self-reliance, focusing on
making use of local resources and markets,
and looking for diversity of fuel technology
and fuel type. Companies are building up their
portfolio of relationships and supply sources
with crossholdings and minority interests
in assets. Key strategies to reduce the risk of
supply shortages include scale, collaboration,
supply chain shortening, infrastructure
investments, new technologies and ‘convoy’
procurement of scarce resources.
By ‘racing for scale’, companies, and increasingly,
countries and regions (for example, the EU),
are pursuing joint efforts to create larger
entities which automatically create larger
off-takes for suppliers. Scale mitigates risk
through spreading the portfolio of contract
S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS
timescales, geographies, and fuel types,
reducing reliance on vulnerable areas.
Joint operations, asset swaps and other
alliances may provide an alternative to
a single company striving for scale.
Collective weight can help in negotiations
and the mitigation of risk.
Shorter supply chains can also help to reduce
the risk arising from intermediaries. This is
especially true from a security of supply
perspective, but can also limit overall losses.
The use of local resources, an approach
increasingly taken by companies, can also
reduce the supply chain.
Infrastructure and Technology Investment
Infrastructure investments are needed to reduce
supply shortages, especially in developing
economies, and also to restore aging assets
elsewhere. Investors are aware of the degree
to which national politics can destroy their
contractual positions. Given the long-term nature
of these investments, investors require a clear
understanding of the political environment and
the risks. A national framework on security
of supply is crucial in order to achieve
investors’ confidence.
New technologies will change the market.
The successful utilities of the future will be
those who make the bold decisions to flex their
assets, supply chains, and operating models.
Governments, and corporates, should consider
a diversified fuel mix as an important means
of mitigating the risk of loss of access to
competitively priced long-term fuel supplies.
 Tony Ward is a Director within the
Transaction Advisory Services Team
at Ernst &Young.
FOR B USINESS
 7 Execution of Strategic Transactions
Strategic risks often result from an attempt to take advantage of
major opportunities. Nowhere is this more evident than in the area of
transactions. Too often a move that seeks to quickly and significantly
respond to an opportunity, becomes an expensive and long-term risk
in its own right.
There is a major risk that transactions undertaken in response to
industry consolidation may fail to deliver, not because they are
poorly conceived, but because of a failure to meet operational
challenges. This was perceived as a high risk by analysts in a
number of sectors including auto, asset management, media and
telecoms. A banking panelist wrote, “Stakeholders expect M&A
to very quickly have a positive effect on the bottom line and create
synergies between the acquirer and the target. Required integration
may challenge the people, process, and technology of the combined
entity. Stakeholder expectations may not be met or the deal may
ultimately need to be unwound.”
New types of strategic transactions, including divestitures in real
estate, spin-offs in auto, and separation of telecoms companies
into utilities and service providers are driving further risk.
While it is the big mergers that dominate the headlines, in some
sectors, excellent execution of small and highly strategic transactions
may have as great a competitive impact. Consumer products
companies are, for example, using transactions more strategically
to acquire innovation. Similarly, in asset management, firms are
employing M&A in the hope of “acquiring… talent that cannot be
home-grown.”
8 Cost Inflation
We have been operating in a low inflation global economy for
some time. Our analysts believe that the return of high inflation
is a major risk. Cost Inflation, though the result of various drivers,
is a significant operational threat for all sectors. In oil & gas,
for example, the problem extends from exploration all the way
through the value chain, impacting everything from refinery build
costs to pipeline construction costs. One sector analyst commented,
“The impact on oil & gas companies is increased pressure on
operating margins, higher risk investment profile, increased asset
portfolio optimization, consolidation, and risk sharing arrangements.
Companies with high cost reserves could be at risk of failure.”
In many cases, these cost pressures are driven by changes to the
fundamental structure of an industry. Demographic changes and the
rising costs of health care are creating a serious challenge for US auto
manufacturers. One analyst noted, “American automobile companies
labor under the weight of health care costs eroding their international
competitiveness.” Another predicted, “The aging workforce at
established Western producers leads to costly buy-outs, benefits,
and so on. There will be an ongoing decline in employment in
the sector in the Western World, with large impacts for
affected economies.”
In biotech, cost inflation is driven by regulation, as well as the
increasing focus on drugs targeting chronic diseases, which means
that “clinical trials are increasingly expensive, and higher costs to
develop drugs put pressure on raising capital and drug pricing.”
In consumer products, by contrast, the structural shifts that make cost
control such a strategic challenge are related to consolidation in retail.
Consumer products are being squeezed between, on the one hand,
a “consolidating base of retailers that has resulted in greater control
over pricing through strong buying power and hard discounters”
and, on the other, “volatility of raw materials prices,” making
management of input prices a crucial challenge. In other industries,
radically changing business models are making cost a centerpiece
of competitive strategy. One notable example is asset management,
where the best performing companies are often those that control
costs through overall scale, or product specialization.
17
 “ This issue of climate change extends beyond just managing regulatory risk.
Climate change and the regulatory and consumer response must be seen
as a fundamental strategic challenge. We can expect a future of carbon
labeling on products, carbon trading worldwide, and tight regulation and
heavy taxes on carbon.”
Jonathan Johns, Ernst & Young

9 Radical Greening 10 Consumer Demand Shifts

We use the term Radical Greening to apply to the increasing
environmental concerns which could be the result of a wide
range of pressures – from the voluntary world of corporate social
responsibility – to hard regulatory and economic necessity.
Radical greening is a strategic risk, partly driven by the consumer
and regulatory responses to climate change, and also by the weather
events resulting from climate change. A specialist in science and
international affairs wrote, “Current climate predictions are based
on models and, naturally, the scenarios communicated to the policy
world are the scientifically conservative scenarios (i.e., those which
most scientists agree are likely). Yet scientifically conservative
scenarios are not necessarily what will happen; it is possible that
the hazard is actually more imminent than is commonly understood.
In this case, we may see physical climate surprises as well as an
increased policy response that is more abrupt than most firms are
currently planning for.”
In the short term, barring such unexpected developments, the
strategic challenge centers on how much ‘radical greening’
firms should undertake. Going green is expensive, but could
pay dividends if consumer tastes and regulation shift quickly.
For example, in real estate ownership, some analysts favored firms
with ‘green’ portfolios. One analyst noted, “As ‘green’ becomes
law it could result in forced obsolescence and write-downs for non-
green real estate assets along with substantial capital expenditure
obligations to meet the new standards.” In a similar vein, in utilities,
“Carbon trading is a reality in Europe and will almost certainly
happen in the US. The caps that are set directly influence the
cost of generation with different fuels and hence can make a
nonsense of the wrong fuel generation mix strategy. Fixed ages
for renewable generation are also likely to come. The imposition
of fixed percentages of renewable power can expose severe strategic
errors of corporate judgment.”
Our final strategic risk for business in 2008 is the failure to
anticipate and respond to Consumer Demand Shifts. There are
a number of examples of such shifts, perhaps the most obvious
being the demand for ‘green’ products or services. Other trends
have already been mentioned, including those driven by
demographic shifts, such as growing consumer aging.
It is the task of business to identify and respond to changes in
demand. Such a challenge moves to be a strategic risk when the
changes are significant, fast or unexpected. A general theme
across the sectors was the challenge posed by consumer
empowerment making this an area of strategic risk. In media
& entertainment, for example, one Ernst & Young panelist
highlighted that, “Consumers today have more power than they
did 10 years ago. Consumers are controlling the decisions about
the content they receive and how they receive it. Consumers today
are driving the content and distribution channels.” In auto,
“Increased interest in customization of products requires a shift
away from mass-production philosophies.” Or, as another consumer
products panelist noted, “Factors such as the web, deregulation
of markets and globalization will continue to lead to a rise in
customer expectations and basic customer segmentation strategies
are already becoming less and less effective, as customers look
for individualized and customized purchase experiences.”
As technology continues to expand consumer power, this challenge
may well rise higher on the radar in the years ahead.

The pace and extent of this new ‘green revolution’ is hard

to predict – but what is almost certain is that some firms will
get the right fuel mix, real estate portfolio, or carbon footprint,
while others will go either too radically green or, more likely,
not green enough.

18 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS

How to Deal with Climate Change Regulation
The climate change debate has made the
environment the biggest single issue in the
public’s mind. We are moving closer to a world of
zero tolerance for environmental accidents and
we have started to see this in recent incidents
involving oil & gas firms.
Many oil & gas firms are already demonstrating
Jonathan Johns
Ernst & Young leading practice in environmental compliance,
but in a zero tolerance environment mistakes
will occur. New roles, such as an environmental
officer, will begin to emerge at the corporate level.
There may also be regular, independent audits
of procedures and we could even see the
emergence of environmental stakeholders
on an independent board.
This issue of climate change extends beyond
just managing regulatory risk. Climate change
and the regulatory and consumer response
must be seen as a fundamental strategic
challenge. We can expect a future of carbon
labeling on products, carbon trading worldwide,
and tight regulation and heavy taxes on carbon.
Companies must make a fundamental decision
about where they want to be in the new
carbon economy.
For many companies, the decision is whether
to adopt a minimal response and simply follow
regulation or to make an active decision to
reduce their carbon intensity, which could be
achieved by offering blended products,
a strategy of acquisitions or by mitigating
through carbon sequestration and storage.
Others may decide to go one step further and
offer services that help their customers to
manage their carbon footprint. The climate
change agenda also presents opportunities
for skills transfer, for example, many of the
capabilities that make a firm a leader in
offshore oil also apply to offshore wind.
Moving into renewable energy is not a ‘one size
fits all’ solution. The fossil fuel era is not over yet.
For reasons of security of supply and economic
growth, petroleum will be used for some time yet.
The degree of repositioning will vary and will
depend on the character of the company, but
many firms are finding renewables and clean
energy a profitable activity. Measures such as
green-friendly tax regimes, carbon trading
and carbon labeling on consumer products
are, however, accelerating the movement.
Those companies that are carbon-friendly
will have a competitive advantage and also
be able to better attract the young talent they
need for the future.
 Jonathan Johns is a Partner in the
Infrastructure Advisory – Renewables,
Waste & Clean Energy Group at
Ernst &Young LLP, UK.
19
 “ Advances in technology have enabled improvements in content
delivery at unprecedented levels. Consumers are now in charge,
empowered by technology.”
John Nendick, Ernst & Young

Responding to Shifts in Consumer Demand

The Media & Entertainment industry continues Aware of the issues that faced and damaged
to evolve at a pace unimaginable even five the music business over the last 5-10 years,
years ago. Advances in technology have media and entertainment companies are
enabled improvements in content delivery at focused on maximizing the healthy margins
unprecedented levels. Empowered by mobile and cash flows from the mature businesses such
technology and new home entertainment as newspapers and magazines and radio and
devices such as digital video recorders (DVRs), television broadcast, while being proactive in
John Nendick consumers are in charge. They insist on the search for new internet and mobile device
Ernst & Young programming tailored to their individual tastes, enabled distribution platforms for both their
preferences and schedules and they take their content and the related advertising. Within this
audio and video streams on the road and strategic process reside a number of key tactical
around the world. We now live in an era issues whose execution can be as important as
where consumers expect consumption of the strategy itself. These include assessing the
their personalized content anywhere, nature of the relationship and business model
anyhow and anytime. with the internet media company or mobile
device business, be it merger, joint venture,
Three years ago in an Ernst &Young survey of
or basic contractual distribution or license
Global Media and Entertainment company CEOs,
arrangement. Digging deeper, a number of other
75% of those surveyed believed that DVRs would
issues arise including assessing the new risks
have the biggest impact on the industry. In a
and appropriate controls surrounding these new
similar Ernst &Young 2006 study of leading
relationships, assessing the tax implications
finance executives, over 80% of the participants
and ensuring that revenue is being received in
thought that personal entertainment and
accordance with the arrangement as well as
communication devices and changing content
appropriate contractual payments made for the
and distribution models would have the biggest
rights of distribution.
impact on the industry over the next 2-3 years.
 John Nendick is the Global Leader
Technology is dramatically changing the playing
of Ernst &Young’s Media &
field for content production as well. It seems
Entertainment Center.
that anyone with a digital device and broadband
capacity can produce his or her own content
overnight and distribute it to a global audience
via the internet. This growth in user generated
content with internet distribution capability has
broken down barriers to entry and changed the
traditional media production and distribution
model overnight.

20 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS

The Next Five
• War for Talent Following these top 10 threats to global business, there are
• Pandemic some risk issues with impacts that are – though perhaps
• Private Equity’s Rise less strategic than the top 10 – nonetheless crucial in
• Inability to Innovate a number of sectors. We review here the ‘next five,’any of
• China Setback which could easily rise into the top 10 list in the future.

The War for Talent is already having a serious impact in some sectors, notably in
oil & gas, which is facing a shortage of technical expertise; asset management and
real estate, which are seeing talented staff poached by alternative investments; and pharma,
which is facing a ‘skills crunch.’ More broadly, analysts highlighted that as growth in
emerging markets takes off, companies in developed markets would no longer
be able to draw on the “global pool of mobile, multi-lingual professionals possessing
advanced degrees from leading universities, a growing share of whom originate from
emerging markets.” In addition, one of the scientists we surveyed, a specialist in corporate
innovation at the Massachusetts Institute of Technology (MIT), noted that there is a
“growing regional concentration/clustering of talent – while expertise can be found in
more nations than ever, within nations it is becoming more concentrated in a small number
of clusters. This phenomenon is particularly true in biotech and other high-tech areas.
This leads to increasing wage rates, property rental, and competition for expertise.”

The possibility of a disease Pandemic is a strategic risk that our panelists rated as significant.
The potential market, economic and operational impacts of an avian flu pandemic have
been much discussed, and a major outbreak would have a dramatic impact in nearly every
sector. There are also more subtle potential consequences including a dramatic shift in
consumer demand which could have large competitive impacts on the pharma and
biotech sectors.

21
 “ In the near future, you will not be able to say you are global unless you are
a major presence in China, India and a few other countries, because these
emerging markets are going to be a major source of financial sector revenue
and profit growth on a global basis.”
Keith Pogson, Ernst & Young

Most manufacturers’
largest markets are mature.
Stagnation in mature markets
means that companies have
to innovate to find profit.
The threat of Private Equity’s Rise has been a serious strategic threat in sectors such as
auto, where “new, non-traditional investor groups such as Private Equity firms are leading
unplanned, hostile takeovers within the automobile industry consolidating, and forcing
restructuring and creating spin-offs.” In real estate ownership, there has also been “a shift from
public to private as record amounts of capital continue to flow into real estate. Companies will
need to re-evaluate their global competitive positioning in light of the wave of recent M&A
activity.” Several analysts also noted that Private Equity might crash just as quickly as it has
risen – a risk alluded to in the second ‘on the radar’ risk, global financial shocks.

However, innovation is a
substantial risk as nine out
of ten new products fail.
The threat of an Inability to Innovate is significant for business in 2008. In a number
of sectors, long-standing patterns of innovation are changing dramatically. In pharma,
“the productivity of pharmaceutical companies continues to decrease as disease targets
become more difficult: big pharmaceutical companies are not discovering or launching
new products. This will have the greatest impact as the patents for the top 10 selling
drugs expire.” In asset management, “the best money managers are setting up boutiques…
The giants cannot hope to compete with the boutiques, despite the risks.” Firms in these
sectors need to replace internal innovation with acquisition of innovation. Even in sectors
where the impact is less extreme, innovation is becoming an increasingly crucial strategic
challenge as markets mature. An Ernst & Young consumer products panelist noted,
“Most manufacturers’ largest markets are mature. Stagnation in mature markets means
that companies have to innovate to find profit. However, innovation is a substantial risk
as nine out of ten new products fail.”

The threat of a China Setback was the last of the ‘next five’ risks. Several analysts we
polled expressed concern that China might experience volatility as it continues with an
extraordinary pace of development. A growth slowdown in China could leave oil & gas
companies suddenly facing a low oil price environment; a severe slowdown could add to
turmoil to world markets or threaten banks or insurance companies with large China
exposures; or a natural disaster in China could disrupt global supply chains. Just as firms
worldwide must manage the risks arising from potential instability in the US dollar or US
financial system (see risk two on the radar), China’s emergence as a major global player
dictates that China’s fortunes will soon become a focus of attention even in companies
without direct China exposures.

22 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS

The Importance of Private Equity
Simon Perry
Ernst & Young
Growth Continues
The annual Ernst &Young study ‘How do Private
Equity Investors Create Value?’ revealed how
the Private Equity (PE) industry is consistently
able to grow and strengthen the companies
under its ownership. By focusing on the business
performance and strategies of PE firms across
the largest deals exited throughout 2006,
the study confirmed that the annual rate of
growth in Enterprise Value (EV) achieved last year
by the largest Private Equity-backed businesses
significantly outperformed equivalent public
companies in the same country, industry sector
and timeframe. Average annual EV growth
rates were 33% in the US and 23% in Europe,
compared to public company equivalents of 11%
and 15% respectively, with over 80% growth in
total enterprise value.
Private Equity ownership creates value from
sustainable improvements in performance and
business growth. Two-thirds of the earnings
growth in PE-owned companies comes from
business expansion, with increases in organic
revenue being the most significant element.
This includes the benefits of investment in
sales and marketing, new product launches,
acquisitions, investment into attractive industry
sectors in the US, and expansion into new
geographies in Europe. Cost reduction,
including operational efficiencies, is also a very The Credit Crunch – Implications for
important element of earnings growth in both Private Equity
the US and Europe, accounting for 23% and Recent developments in the credit markets
31% respectively of the total growth in earnings may have caused concern. The liquidity crunch
What are the Secrets of Private has meant that the debt markets are more or
Equity’s Success? less closed for new large LBO deals resulting
in a significant slowdown in transactions.
The study showed that Private Equity investors
Market participants view this as a short term
are highly selective and well researched when
dip in activity prior to returning to a more
making the decision to buy a business and have
rational climate in 2008. There is a long term
the ability to drive real efficiencies through the
belief in the PE model by the market and the
business plan under their ownership. This finding
long term fundamentals remain strong.
was true across deals in the US and all main
The recent events may well prompt a more
European countries. Three-quarters of
conservative approach by banks, when doing
investments resulted from proactive deal
deals. This could result in an increasing need
origination strategies, including company or
for due diligence at acquisition.
sector tracking, building relationships with
management, or introductions from established Although the credit squeeze may reduce
contacts. Across almost all deals and ownership the benefits from leverage and enhance the
strategies, Private Equity investors were actively importance of underlying profit growth,
involved in the business after acquisition, Private Equity will continue to be an important
making rapid decisions alongside management, factor in the world’s financial markets.
challenging progress and making available
What are the implications of the continued
specialist expertise. The intensity of engagement
growth of Private Equity for corporates?
between Private Equity investors and
Every company needs to develop a strategy for
management was often stronger than under
engaging with Private Equity, whether partnering
the previous owners.
with, buying from, selling to or competing
This rapid growth in the scale and success of with them.
 Simon Perry is the Global Head of Private
Private Equity has brought with it increased
scrutiny: politicians in many countries are
Equity at Ernst &Young.
reviewing whether and how to regulate and tax
the industry; corporates are considering how
to compete with and learn from the different
business model; concerns are being raised about
the security of jobs and employment benefits.
Despite those concerns, the clear advantages
of the Private Equity model are likely to result
in continuing investment and growth.
23
 “ Individual companies need to consider the potential impact
of a global pandemic on their workforce, infrastructure,
supply chains and operational capabilities.”
Dr. David Shotton, University of Oxford
Will the Pandemic Make You or Break You?
Dr. David Shotton
University of Oxford
Pharmaceutical companies are well accustomed
to dealing with frightening diseases. Think of it
this way: the ability of pathogens to evolve rapidly
into forms that can evade the adaptive defenses
of the human immune system is, in a sense,
a biological arms race. In any form of warfare,
arms manufacturers stand to make significant
profits. In the fight against infectious diseases
that present a risk of epidemics, pharmaceutical
companies provide the front-line weapons for
the defense of humanity.
However, an influenza pandemic is different. It is
different because it will present overwhelming
operational challenges that will cause many
companies, including pharmaceutical
companies, to fail. Flu pandemics occur on
average once every 30 years. The last one,
the ‘Hong Kong flu’ of 1968, was relatively mild,
killing ‘only’ one million people. The last severe
influenza pandemic was the ‘Spanish flu’ of
1918, which killed an estimated 40 million
people. The most likely candidate for the next
pandemic is the current H5N1 strain of avian
influenza, which is highly pathogenic to birds.
This has spread rapidly (more than half the
countries in which it has appeared first reported
the disease in 2006), and can infect humans,
24
in whom it is abnormally deadly, killing roughly develop contingency plans detailing what to
60% of confirmed patients. The number of do in preparation now, how to cope during the
human deaths that might occur if H5N1 became pandemic, and how to survive afterwards during
easily transmissible between humans is the long recovery process, where the well-
impossible to estimate, but may far exceed the prepared will have large commercial advantages.
67 million deaths caused by the Black Death. Critical functions must be defined, and plans
made for backup, cross-training and working
A flu pandemic differs in three principle ways
from home, using decentralized IT. Essential
from most other forms of natural disaster.
supplies including emergency generators,
First of all, it is of extended duration, with two or
fuel and raw materials may need to be stockpiled
three successive waves of infection each lasting
if work is to continue. Provision must be made
10-12 weeks, separated by several months.
for illness and deaths on the work premises,
Secondly, it will disrupt all aspects of society,
and for the care and quarantine of those
causing a breakdown of most normal services
affected. Clear criteria are required concerning
and, most likely, widespread civil unrest
who will trigger the emergency plan and under
(e.g., looting). Thirdly, because of its global
what circumstances, and any plan must be
nature, there will be no ‘outsiders’ to come to
tested in reality and refined iteratively.
the rescue and thus recovery by the survivors
 David Shotton is Reader in Image
will be slow. The potential economic cost of the
global recession such a pandemic would trigger Bioinformatics within the Department of
is put in trillions of dollars. Zoology, Mathematical, Physical and Life
Sciences Division, University of Oxford.
Individual companies need to consider the
potential impact of a global pandemic on their
workforce, infrastructure, supply chains and
operational capabilities. How will you continue
to function when key staff are ill or dead,
absenteeism is at 50%, normal travel and
trade have been severely curtailed, and there
are national shortages of food and energy?
The decision to make adequate preparation for
a flu pandemic must come from the highest
levels of management and involve every
department – this can make the difference
between the survival or the collapse of
companies. Pharmaceutical companies must
S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS
Explosive Expansion in Asian Banking
Keith Pogson
Ernst & Young
Three of China’s banks are already included in
the global top 10 banks by market capitalization.
Chinese banks bring a new and decisive
competitive advantage as they have a very
different cost base. They have lots of cash,
and with a 40% savings rate in China,
that liquidity isn’t going away. These banks are
also able to borrow at 1 to 2% so they can easily
lend at 3 to 4% and make a couple
of hundred basis points.
These banks could be concerned about losses
from a revaluation of the renminbi (offical
currency of the Republic of China), but these
banks are extremely motivated to go global.
Eighty to 90% of their exposure is to the Chinese
economy, so almost anything outside of China
creates diversification and reduces their risk.
This makes major global expansion, including
acquisitions likely to happen, which will have
a major impact on global markets within
three years.
The Risks for Global Banks Entering Asia
If foreign banks enter the Asian market too
late, they will be unable to keep up with the
competition. In the near future, banks will not
be able to say they are global unless they have
a presence in China, India and a few other
countries, because these emerging markets are
going to be a major source of financial sector
revenue and profit growth on a global basis.
The second major risk is the failure to manage
internal controls. This is especially true for a
European or American bank, that may have
limited knowledge of the fast-paced growth
in distant markets. The question for many
is what to do first, implement their control
infrastructure or grow revenues? Foreign banks
can find themselves in a situation where they
are suddenly managing 50,000 people instead
of 50 people. This stresses existing controls
and can lead to serious mistakes with
global consequences.
The third risk for foreign banks is regulation.
Regulators in Asia have varying degrees of
sophistication and regulatory responses can
be local or political, which can be difficult
to address. Reputation is critical to market entry
and a bad reputation could result in a foreign
bank being barred from a market.
The Top Risks for Asian Banks
The main threat for Asian banks is that they
are transforming very rapidly from government
bureaucracies into corporate governance and
transparency-driven organizations.
This could lead to significant challenges,
some of which could threaten their survival.
For example, Chinese banks have enviable
cost-income ratios of 35%. But these ratios often
rely on cheap, manual labor. As China develops
and labor costs rise, banks will need to automate
to keep costs down. Some of these banks have
10,000 or more branches. If a system is
automated incorrectly, this ‘cost saving’ might
cause profitability to collapse.
Another major issue is deregulation. Some
of these banks will make the transition to a
deregulated, more competitive environment,
and some will not. In China, the central bank
maintains a 300 basis point borrowing-to-lending
spread. When this situation changes, and these
banks suddenly need to manage interest rate
risks, not all of them will be able to manage
these effectively.
 Keith Pogson is a Senior Member of
the Hong Kong Financial Services Team
at Ernst &Young.
25
Conclusion
Properly approached,
the process of risk
management can add
value even if, fortunately, the
event never happens.
26
This has not been a random selection exercise but, rather,
a structured consultation with both sector and subject-matter
experts from around the world. They have identified trends
and uncertainties, and assessed risks and their impact
both on individuals and on the markets the conclusions
merit attention.
Together, we have identified the top 10 risks for business for the coming year and have
outlined our view of other major risks that lie just “below the radar.” These are not
predictions, but considering them can help companies to prepare.
We acknowledge that this is just a snapshot of the risks that we see at this time. Change is
constant in the market so risks will change over time; so do our perceptions. If we had done
this exercise 10 years ago, it is fair to question whether climate change would have featured
so significantly. The climate was already changing, but our awareness of the fact and our
perception of its importance was much different.
Yet, even as a snapshot and even recognizing the consistency of change, no company should
treat this list as applying in totality to them. Just as the global market is everywhere and
yet, paradoxically, nowhere – each point of contact, each purchase or sale, is both specific
and local. So it is with strategic business risk. We have done the analysis and mapped out
our conclusions accurately for the macro-economy. Yet, for every sector, and indeed,
for each company within a sector, the strategic business risks will vary.
This was the hypothesis for our research and why we have based the work on the 12 sectors.
Our studies show tremendous variation in risk and the relative importance of each factor
depending on sector.
Today’s Strategic Risk could be Tomorrow’s Strategic Opportunity
So what is the value of such analysis and what, most importantly, should management
do with it? We hope that our work illustrates the range of strategic business risks that
companies need to be aware of. We have consulted widely, but this is not an exhaustive
study and there can be no exhaustive list of risks. We hope some of the risks we have
identified surprised you and some of the weightings that we have attached to them in the
rankings differ from those that you would apply. This is an ongoing dialog and one we
believe that you need to have within your organizations. You may have in place your own
equivalent of a strategic business ‘risk radar’, but how is this kept current, and does it
adequately warn you of potential strategic risks in an appropriate manner?
S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS
Test your corporate Properly approached, the process of risk management can add value even if, fortunately,
the event never happens. One client we worked with was concerned about the impact of
competency in identifying, avian flu on their business. In working through scenarios and impact analysis, the client
identified numerous opportunities to tighten processes and controls that have had a
assessing, managing and beneficial impact despite the non-occurrence of the pandemic that they feared. It was
monitoring strategic risk. the dialog and management action that delivered the value, not an improved response to
the event.
Turn today’s strategic
Our work with companies around the world suggests that there is a body of leading risk
risk into tomorrow’s management practice emerging, but that many companies are still doing too little in this
strategic opportunity. area. In our recent study, Companies on Risk: The Benefits of Alignment, 42% of global
companies identified gaps in their risk coverage. Our subsequent study found that,
overwhelmingly, these gaps were in business and operational areas, rather than financial.
There is a growing recognition of the problem – indeed 66% of companies in the same
study forecast that their investment in risk management was going to increase over the next
three years.

Company leadership must:

• Conduct an annual risk assessment that defines key risks and weights probability and
impact on business drivers. Many companies undertake some form of risk assessment,
but our experience suggests that too many do not do this on a frequent enough basis.
Our research suggests that one in five do not perform a risk assessment and over one-
third conduct a risk assessment less than once a year.
• Such a risk assessment needs to go beyond financial and regulatory risk to consider
the wider environment in which your organization operates and the full extent of its
operations. Less than 50% of respondents to our survey, Compliance to Competitive Edge:
New Thinking on Internal Controls, believed that they had effective controls for M&A,
IT implementation, business continuity planning, real estate construction, transaction
integration and expanding into new international markets.
• Conduct scenario planning for the major risks that you identify and develop a number
of operational responses – this can be a useful part of the planning cycle and help
encourage innovative thinking.
• Evaluate your organization’s ability to manage the risk that you identify – in particular
ensure that your risk management processes are linked to the risks that your business
actually faces. The responsibility for risk must sit with the business. Do you have a
‘risk radar’? Is it current, and how will it warn you of potential risks?
• Effective monitoring and controls processes can give you both earlier warning and
improved ability to respond. There can be value from much of the compliance activity
demanded from regulators, but this has to be mined.
• Keep an open mind about where risks can come from. Ours is an increasingly
interdependent global economy and risks that can damage your business can initiate in
markets and sectors a long way from your own. High risk mortgage lending in the US to
people with limited or no creditworthiness ends up hurting the pension funds of the most
cautious saver.

27
Contacts
Risk Advisors Name: Telephone: E-mail:
Global Jim Holstein +1 216 583 4001 james.holstein@ey.com
Americas Frank Gori +1 216 583 2981 frank.gori@ey.com
Central Europe Gerd Stuerz +49 211 9352 18622 gerd.w.stuerz@de.ey.com
Continental Western Europe Maxime Petiet +33 1 55 61 3147 maxime.petiet@fr.ey.com
Northern Europe, Middle East, India & Africa Alan McGuinness +44 207 951 4119 amcguinness@uk.ey.com
Singapore Michael Sim +65 6309 6706 michael.sim@sg.ey.com
Japan Takaaki Nimura +81 3 3503 1272 nimura-tkk@shinnihon.or.jp
Oceania Craig M. Jackson +61 2 8295 6551 craig.m.jackson@au.ey.com
Business Risk Services Inge Boets +32 3 270 1223 inge.boets@be.ey.com
Financial Services Risk Management Lawrence Prybylski +1 212 773 2823 lawrence.prybylski@ey.com
Tax Accounting and Risk Advisory Services Joseph Hogan +41 58 286 3184 joseph.hogan@ch.ey.com
Technology and Security Risk Services Paul van Kessel +31 20 549 7271 paul.van.kessel@nl.ey.com
Fraud Investigation and Dispute Services David Stulb +1 212 773 8515 david.stulb@ey.com
Actuarial Services Tim Roff +44 207 951 2112 troff@uk.ey.com

Sector Leaders Name: Telephone: E-mail:

Automotive Mike Hanley +1 313 628 8260 michael.hanley02@ey.com
Asset Management Ratan Engineer +44 207 951 2322 rengineer@uk.ey.com
Banking & Capital Markets Jim Fanning +1 212 773 3144 james.fanning@ey.com
Biotechnology Glen Giovannetti +1 617 859 6598 glen.giovannetti@ey.com
Consumer Products Howard Martin +44 207 951 4072 hmartin@uk.ey.com
Insurance Peter Porrino +1 212 773 8468 peter.porrino@ey.com
Media & Entertainment John Nendick +1 213 977 3188 John.nendick@ey.com
Oil & Gas Rob Jessen +1 713 750 4952 rob.jessen@ey.com
Pharmaceutical Carolyn Buck-Luce +1 212 773 6450 carolyn.buck-luce@ey.com
Real Estate Dale Anne Reiss +1 212 773 4500 dale.reiss@ey.com
Telecommunications Vincent De La Bachelerie +33 1 46 93 6205 vincent.de.la.bachelerie@fr.ey.com
Utilities Ben van Gils +31 10 406 8555 ben.van.gils@nl.ey.com

28 S TRATEGIC B USINESS R ISK : 2008 – T HE TOP 10 R ISKS FOR B USINESS

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