Natural Disasters and Cyber Attacks Can Cause Businesses Severe Harm, But Strategic Disruptions Pose the Greatest Threat

COLUMBUS, Ohio, March 20, 2018 /PRNewswire/ -- Hurricanes and wildfires wreaked havoc on the operations of many U.S. middle market companies this past fall. But new research shows that far more threatening and difficult to weather are strategic disruptions which could include radical technological change and the impact of immigration and trade policies now being debated in the nation's capital.

The National Center for the Middle Market's (NCMM) new special report, Risk & Resilience in the Middle Market: How companies prepare for and respond to major business disruptions finds that strategic disruptions such as industry consolidation, new technology, changing regulations, trade agreements, and macroeconomic trends are the most prevalent, costly, and difficult for companies to recover from. They are also the risks that businesses are least prepared to handle.

The Report, based on a survey of more than 1,000 C-level executives in December 2017, shows that more than one-quarter (27 percent) of companies experienced a strategic disruption in the past two years, compared to 21 percent that faced an operational disruption and 17 percent that were affected by a digital disruption.

The impact of a strategic disruption is far more lasting than other business risks. While 23 percent of companies polled had not recovered fully from an operational disruption experienced within the past 24 months, that number rose to 60 percent for middle market businesses that endured a strategic disruption--and 14 percent had not recovered at all. Strategic disruptions also take the greatest toll on a company's finances, costing, on average, 14.2 percent of its annual revenue.

"We often focus on the effects of national disasters and cyberattacks on businesses because they make news and more visibly affect communities; but as this report shows, strategic disruptions are clearly the most damaging," said Thomas A. Stewart, Executive Director, NCMM. "They also have the most enduring effects because they can undermine the very foundation of a business, making recovery challenging and sometimes impossible."

Despite the serious risks strategic disruptions pose, businesses are least prepared to deal with them. More than two-thirds (67 percent) of companies say they're only somewhat to not at all prepared for a strategic disruption. That's compared to 60 percent and 54 percent of companies that say they are well prepared for an operational and digital disruption respectively.

Weathering the Storms

Given the natural disasters that struck several states in the fall of 2017, the Report takes a closer look at the impact of the operational disruptions they caused to businesses in Texas, Florida and California.

Businesses in Houston reported significant damage to operations and inventory from Hurricane Harvey but a vast majority (80 percent) have fully recovered from its effects. And while Florida companies have plenty of experience with hurricanes and consider themselves well prepared for those operational disruptions, Hurricane Irma had a far greater impact than the natural disasters that hit Texas and California, with more than one-third (37 percent) of Florida business still struggling to recover fully from the storm.

About the National Center for the Middle Market (NCMM)

The National Center for the Middle Market is a collaboration between The Ohio State University's Fisher College of Business, SunTrust Banks, Grant Thornton LLP and Cisco Systems, Inc. It exists for a single purpose: to ensure that the vitality and robustness of Middle Market companies are fully realized as fundamental to our nation's economic outlook and prosperity. The Center is the leading source of knowledge, leadership, and innovative research on the middle market economy, providing critical data analysis, insights, and perspectives for companies, policymakers, and other key stakeholders, to help accelerate growth, increase competitiveness and create jobs in this sector.

Housed at The Ohio State University's Fisher College of Business, the National Center for the Middle Market is the first center of its kind in the nation. The Center enthusiastically serves middle market firms, students, academic researchers, policy makers, the media and other key stakeholders with interests in the health and well-being of the middle market. The Center is fully committed to funding and distributing the most credible open-sourced research, dynamically creating new knowledge, providing programs that drive value for middle market companies, and offering a well-informed outlook on the health and future of the middle market via the Middle Market Indicator.

SOURCE National Center for the Middle Market