Well-prepared leaders accept risk and make better decisions in times of economic uncertainty, according to new research from Aon.

Aon’s 2022 Executive Risk Survey, Making Better Decisions in Uncertain Times, was compiled from more than 800 interviews with senior managers and executives from companies with 500 or more employees . Respondents were asked what differentiates leaders who are well-prepared for a recession, as well as how they make better decisions to position their companies for growth.

A large majority (79%) of business leaders expect a recession this year. However, only 35% said they felt very prepared for this recession.

“Strong, prepared leaders are essential to protecting an organization’s resilience and finding growth opportunities in the face of increased volatility,” said Greg Case, CEO of Aon. “This year’s report finds that leaders who are highly prepared to face economic challenges embrace calculated risk-taking as an engine of growth.”

The survey found that leaders who were highly prepared for a recession shared four fundamental attitudes:

  • Accepting the risk is the only option: Sixty-two percent of highly prepared leaders said their company’s appetite for risk had increased in response to current macroeconomic conditions.
  • Internal and external stakeholder analysis and advice is key to making better decisions: Highly prepared leaders were nearly twice as likely to say they valued advice from an outside advisor to improve their company’s decision-making and address risk. Confident leaders have also resisted the urge to slow down hiring, even in tough economic conditions. Forty-two percent of highly prepared leaders said they spent a lot of time on attracting and retaining top leadership talent, compared to just 22% of other leaders.
  • COVID-19 has demonstrated that the risks are interconnected: Sixty-one percent of highly prepared leaders said their experiences during the COVID-19 pandemic demonstrated the interconnectedness of risk. Seventy-three percent strongly believed that the pandemic had prepared them to react quickly to emerging risks, giving them increased confidence in the face of a possible recession.
  • Don’t hold back on long-term investments – or ignore long-term risks: The top five risks that all respondents said they focus on are inflation, a financial crisis, energy supply, cyberattacks and supply chain disruptions. In addition to dealing with these risks, highly prepared leaders also spend more time than other leaders considering longer-term risks such as economic and social inequality, disruptive technologies, crypto and blockchain. Forty-nine percent of highly prepared leaders also spend a lot of time on climate change, compared to just 26% of other leaders.

“Climate risk is not a probability, it’s a certainty – and severe weather is increasingly a part of everyday life,” Case said. “What this research shows us is that while climate change is one of our greatest challenges, it could also be one of our greatest opportunities. It is the ultimate example of the interconnectedness of risk.

“More and more companies are looking at the challenges caused by climate change beyond regulatory compliance and reputation management and exploring related risks where the impact is immediate and measurable – business interruption, shortage of materials, supply chain issues and reputational damage. And we find that leaders who invest more time and resources to meet the challenge are better prepared for it.