Firms work up a risk appetite as they expect rates to fall next year

Board directors will take more risk and focus on potential acquisition opportunities next year, an international study of bosses has shown, thanks to an expected fall in interest rates and inflation.

The research, which polled more than 300 board members at companies with turnovers of $250m or more, found 61 per cent of bosses were planning to raise their risk profile next year, three times more than the 18 per cent who said their risk appetite will be lower.

The key reason for the rise in investment risk appetite is the belief that pricing around deals will become more attractive. Nearly one-third (29 per cent) selected that as one of their top three reasons for an increased investment risk appetite, while 27 per cent selected lower interest rates and 25 per cent selected more opportunities to make distressed purchases among their top three.

Meanwhile the directors with a falling risk appetite cited ongoing geopolitical uncertainty and increasing costs as the main reasons forcing them to batten down the hatches into next year.

The study, which polled directors from the US, UK and Middle East, was conducted by financial service provider Ocorian.

Paul Spendiff, the company’s head of business development and fund services, said: “Investment risk appetite is clearly increasing, with senior executives and major investors expecting a shift in global macroeconomic conditions as well as more opportunities for acquisitions at more attractive prices.

“The optimism about the year ahead and growing confidence is tempered by a focus on risk management and… there are concerns about the year ahead ranging from global political uncertainty and heightened global tensions in the Middle East and Ukraine.”

The types of concerns leaders cited to the study’s pollsters echo those listed in a recent report from the Economist Intelligence Unit in which half of the top ten biggest risks to the global economy were geopolitical.