The Top Risks for 2023: A Global View

A global survey of C-level executives and directors focused on macroeconomic, strategic, and operational risks highlights the influence of the economy, people and culture issues, supply chain risks, and technology impacts on the 2023 risk landscape. Capturing insights from 1,304 C-level executives and directors, 47 percent of whom represent companies based in North America, the survey was conducted online from September to October 2022. The survey was created to capture perspectives on 38 risks on the minds of business leaders as they looked forward to 2023.

The following list ranks the 10 highest-rated global risk themes in order of priority to provide a context for understanding the most critical uncertainties companies face over the next 12 months:

1. The organization’s succession challenges and ability to attract and retain top talent in a tightening talent market may limit its ability to achieve operational targets.

2. Economic conditions in the company’s markets may significantly restrict growth opportunities.

3. Anticipated increases in labor costs may affect the ability to meet profitability targets.

4. Resistance to change may restrict the organization from making necessary adjustments to the business model and core operations.

5. Uncertainty surrounding the core supply chain ecosystem (e.g., viability of key suppliers and energy sources, shipping and distribution logistics, price stability) may affect the company’s ability to deliver products and services at acceptable margins.

6. Changes in the overall work environment (e.g., shifts to a hybrid workplace, evolving labor markets, changes in the nature of work) may lead to challenges to sustaining organizational culture and business operations.

7. Adoption of digital technologies may require new skills that are in short supply, requiring significant efforts to upskill or reskill existing employees.

8. The organization’s culture may not sufficiently encourage timely identification and escalation of market opportunities and risk issues that could affect core operations and the achievement of strategic objectives.

9. The approach to managing demands or expectations of a significant portion of the workforce to be able to work remotely or as part of a hybrid work environment may impact talent retention.

10. An organization may not be sufficiently resilient and agile to manage an unexpected crisis that significantly impacts business operations or reputation.

Several key takeaways from the survey are summarized below.

Overall, 2023 is viewed as the riskiest year in more than a decade. The 2023 risk environment is the most perilous noted in the 11 years this survey has been conducted. The respondents’ collective year-over-year responses indicate that the risk environment for 2023 is riskier than what they were anticipating for 2022 and 2021. All risks were rated higher for 2023, with just three exceptions pertaining primarily to the impact of the COVID-19 pandemic and government health protocols on business operations.

Once again, people and culture are at the top of the agenda. Finding and keeping talent is the number one risk overall for 2023. Globally, this is the only risk issue rated at the “significant impact” level. Other highly rated aspects of people and culture include rising labor costs, resistance to change, the need to upskill and reskill employees, the inability to timely identify and escalate significant market opportunities and emerging risk issues, and the impact of the evolving workplace on organizational culture and operations.

Economic issues remain significant. Not surprisingly, a tough global economic climate is anticipated in 2023 as growth projections are cut and segments of the world’s economy are forecast to contract. Uncertainty over central bank policies amid persistent inflation, rising labor costs, and supply chain disruptions also contribute to clouded perceptions regarding the economy—both now and in the future.

Supply chain issues are elevated in the near term. Uncertainty surrounding the viability of key suppliers and energy sources, unpredictable shipping and distribution logistical issues, and concerns over price stability in the supply chain ecosystem are impacting the ability to deliver products or services at acceptable margins. Looking 10 years out, survey participants believe the fundamentals underpinning this risk will stabilize.

Cybersecurity and data privacy remain significant priorities. The scores for these two risks increased year over year compared to our prior year results for 2022, indicating that they remain critical concerns for the board and C-suite. That they are not in the top 10 list suggests a lot is on the plate for 2023.

Environmental, social, and governance (ESG) considerations vary in emphasis. As noted above, risks related to people, workplace design, and culture are top of mind. Hence, many human capital management matters pertaining to the “S” in ESG received significant play in this year’s survey, as they did last year. As for the “E,” climate change concerns have increased year over year but continue to be greatest in those industries that are heavily reliant on market acceptance of fossil fuels. Most respondents do not perceive the risk of potential alterations in their organizations’ strategies and business models from climate change issues with as much concern as they view the implications of other risks.

The largest risk increases tell a story of a changing world. Looking out 12 months, the five risks that saw the largest year-over-year increases in average ratings are interest rate risk; geopolitical shifts and regional conflicts; shareholder activist risk pursuant to performance shortfalls (including with respect to ESG expectations); risks related to global trade and changing assumptions underlying globalization; and political uncertainty. The world is changing now, with more change to come.

The risk of regulatory changes and scrutiny continues to loom large. While the risk of the regulatory environment affecting the processes, products, and services of the business increased year over year for 2023, it declined in relative significance to other risks.

The COVID-19 pandemic has reached an endemic state. Risks related to the pandemic have declined this year—specifically, market conditions imposed by and in response to COVID-19 and emerging variants.

As leaders look forward to the next 12 months, the message is that talent, succession and culture issues, economic uncertainty, supply chain challenges, and the impact of digital transformation initiatives are expected to command the most attention in the C-suite and boardroom. Boards should consider these risk themes and takeaways in evaluating their risk oversight focus for the coming year in the context of the company’s risks inherent in its operations. If senior leadership has not identified or prioritized these issues as matters to consider in managing the business going forward, directors should consider their relevance to the company’s strategy and business model and ask why not.