Economic volatility, geopolitical upheaval, and the disruptive force of AI has driven the corporate threat level to its highest in 12 years, according to Clyde & Co’s annual corporate-risk radar.

The survey of C-Suite decision-makers, in-house legal teams, and general counsel found that escalating threats on multiple fronts were creating a ‘polycrisis’ of risk.

This is having a dramatic impact on corporate decision-making, and risk caution is estimated to be costing as much as 5% of corporate revenues, with more than a quarter of respondents saying that risk perception was stymying ‘bold decision-making’.

General counsel were the least optimistic about their readiness to deal with market disruption, perhaps reflecting their proximity to these risks compared to other leaders and board members.

Some respondents highlighted the growing tension between boards and executive risk-management, with the suggestion that boards were often relying too heavily on executives to identify and present risks.

Top risk rankings

Economic risk – inflation, interest rates, and currency volatility – cemented its position as the number-one threat, according to business leaders.

This was followed by ‘people’ challenges that include attracting and retaining talent, upskilling, management, and succession planning.

The impact of AI is increasingly evident. While respondents said that AI was a potential source of competitive advantage, an urgency to embed this technology was prompting a "gold-rush” mentality, with the fear of being left behind driving decision-making.

Contradictory regulations

Divergent and often contradictory regulations on AI were just one concern respondents cited, but they were part of a much wider concern about the overall regulatory burden companies were having to manage.

Regulatory and compliance risk is now the joint second-biggest issue organisations are tackling, according to the report – up 9% on 2023’s findings.

With numerous regional conflicts persisting or escalating and further political uncertainty and upheaval likely, thanks to an unprecedented year of elections around the world, geopolitical risk surged 11% from last year, ranking fourth.

Eva-Maria Barbosa (Clyde & Co partner) said: “Organisations are having to deal with risks that were never on their radar in the past. An unpredictable economic environment, with shorter and more volatile cycles, is being fuelled by growing geopolitical tensions. In response, we are seeing a proliferation of sanctions and a greater regulatory burden that organisations must now navigate.”