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Risks mount for companies

"The conventional response to managing in a recession was exactly the wrong thing to have done in the recent financial crisis."



Financial TimesDaniel Garrahan13 March 2012


PA Consulting Group’s Mark Thomas, business strategy expert, is interviewed as part of the Financial Times Future of the Company special report.  Company bosses have had to get used to a high level of uncertainty in the running of their businesses, from market turmoil and the threat of sovereign defaults to the rise in reputational and regulatory threats. But what exactly are the risks, and how can they be managed? Mark discusses the issues with the Financial Times’ Daniel Garrahan.

PA Consulting Group recently released a report on how to manage uncertainty and Mark is asked what this shows: “What PA’s Managing Uncertainty report shows is that the conventional response to managing in a recession was exactly the wrong thing to have done in the recent financial crisis.

“In a conventional crisis people batten down the hatches and wait for business as usual to return. But that mind-set made companies too cost focused and too passive.”

Mark is then asked what risks companies will be exposed to over the next few years: “There are quite a few really big risks which could cause trillion dollar damage to the system. These are the Eurozone, the hard landing in China and also we don’t know how stable the Japanese economy is. All of these are potentially very big issues.”

Mark is also asked what companies can do to protect themselves: “They need to make sure they are not in denial about how fundamental some of these issues are so they can protect themselves accordingly. There is also the other side of the coin, which is that this is a time of great dislocations and there will be great shifts, so there will be winners as well as losers. Companies need to plan now how they can come out of the crisis stronger.”

Finally, Mark comments on how the crisis will affect managers and employees on the ground: “For managers, there is a real psychological issue not to shy away from these things and to face up to them squarely. They must not become negative or defensive and make sure they remain positive. Employees are in the hands of their managers, so if managers do this, employees have an exciting future.”  

You can watch the interview in full here.

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