Most of the blame for the current financial crisis lies with risk management practices at banks and other financial institutions, according to corporate finance executives in a survey.
Taken earlier this month, before yesterday's government bailout plan failure and market plunge, the poll by Stamford, Conn.-based Towers Perrin found that 63 percent thought the turmoil would impact their company's financial prospects.
Of those, 4 percent thought their firms would suffer substantial harm. But 38 percent said their companies would not be adversely impacted, with 2 percent of those saying they expected a substantial benefit.
Towers Perrin said its survey drew responses from 125 finance executives in 16 industries, and most of them were chief financial officers–half from companies with more than $500 million in annual revenue–and 26 percent were from the insurance, financial services and real estate sectors.
The negative economic events have made 74 percent more concerned about their ability to carry out "strategic plans (acquisitions)." Sixty-five percent now have more concern about their businesses' ability to access long-term debt financing and 72 percent are more concerned about risk management practices at their companies.
However, 58 percent said the level of board engagement with risk management policies is not likely to change, and employee engagement with risk management is also unlikely to change, according to 59 percent.
Fifty percent said their relationships with banks would now change, and the other half said that their relationship with banks would not likely change.
Regarding the actions of banks and financial institutions, 63 percent said their risk management practices made a major contribution to the financial crisis and 31 percent said it had made "some contribution."
Survey respondents agreed that other major contributions were caused by financial instruments of increased complexity (59 percent), financial market speculators (57 percent) and predatory lending practices.
The survey group saw less impact from factors such as irresponsible homebuyers, incentive compensation practices, banking deregulation and fair value accounting requirements.
Eighty-three percent said that incentive compensation practices at their firms were unlikely to change as a result of the financial problems, and 59 percent said they thought the consolidation among financial services companies brought on by the present financial conditions would harm their U.S. corporate customers.
Fifty-two percent of respondents said they would be surprised by a bailout of U.S. automakers, and 62 percent had the same opinion about a bailout of airlines.
Celina Rogers, research director at CFO Research Services, in part of a statement issued with the survey said, "CFOs and their teams are making decisions in the wake of this crisis that will affect not only their own companies but the economy as a whole.
"The results of this survey show that senior finance executives are certainly concerned about funding their companies in the short term, but the long-term consequences of the crisis–its effect on companies' ability to carry out strategic plans and its risk management implications–are also first-order issues to emerge from this crisis."
The full survey is online at www.towersperrin.com.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.