Survey Shows Regional Variations In Investors’ Attitude To Risk

by Phillip Morton, Investors Offshore.com

15 August 2005

According to new research, investors in different parts of the globe tend to differ when considering what constitutes the most important risk factor in investment decisions.

The survey by executive search firm Russell Reynolds Associates, which polled 101 institutional investors from a cross section of equity fund types throughout Europe, North America, and Asia, showed that investors in Europe see management risk as the most significant risk factor when making an investment decision, with 87% regarding it as very important.

By contrast, investors in North America regard credit risk as the most important risk, while in Asia, market risk is regarded as most important.

Other findings showed that 85% of European investors believe that the board plays an extremely or very significant role in a company’s performance, while in North America the figure was 63%. Accordingly, 50% of European investors said they closely montor the composition of the boards of companies they invest in, compared to a figure of less than 40% in North America.

Perhaps reflecting investor concern caused by a number of high profile corporate scandals in recent times, North American investors saw improper or unethical business practices as the most important potential management risk, placing this factor above other potential risks such as board battles or succession planning.

In Europe, investors are particularly anxious about the accuracy of financial reporting, with 90% saying that the failure of companies to comply with accounting and other regulations is a major concern.

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