Conference Board: Canadian Businesses Lack Financial Means To Take Risks

Only 15 per cent have willingness and financial capacity to take significant risks

A new Conference Board of Canada report says Canadian companies can’t roll with the financial punches to take on new and greater risks.

The report, Innovation And Canadian Business Survey, 2014: What’s Risk Got to Do With It?, says about 70 percent of businesses are “realists in aligning their risk-taking with financial capacity,” while only 10 percent are truly risk averse. But regulations, financing, lack of time and employees’ skill levels are proving to be the big barriers to innovation rather than risk aversion.

“Our study found that the majority of Canadian businesses are willing to take risks—the problem is that they have limited financial means to absorb potential losses,” says Michael Grant, the Board’s research director.

The report says that only about 15 per cent of businesses have both the willingness and financial capacity to take significant risks and absorb the losses associated with these risks.

About five per cent of companies could be considered “wishful thinkers” because their risk tolerance exceeds their capacity to absorb losses.

“Rather than assume all Canadian businesses are risk averse or that Canadians should fund businesses with greater risk appetites, to improve Canada’s innovation performance we need to increase the number of Canadian businesses who are willing to take significant risks and have the financial capacity to do so,” says Grant.

The report urges realists to try to grow their businesses so they can take on more risk as they expand. “Wishful thinkers” need to either expand their businesses so that it matches their risk tolerance or get outside parties to fund their ambitions. “Meanwhile, by making changes to leadership, management, or corporate culture, risk-averse businesses could better position themselves to take more chances.”

Copyright © 2017 Transcontinental Media G.P.
Transcontinental Media G.P.