Innovation and Risk—Not Everyone Appears to See the Disruption Equally

A recent project by the Center for Excellence in ERM at St. John’s University analyzed Fortune 100 disclosures about innovation. The approach considered both risk factor disclosures in Item 1a (which tend to be negative) and other disclosures in the Annual Report where the company talks more about how they are innovating (these tend to be positive disclosures about innovation).

The analysis shows that the average Fortune 100 company mentions innovation in a positive way seven times, which is more than twice as often as they mention innovation in a negative way—three times. This is good news, and partially suggests that large companies see innovation as a problem but also as an opportunity. Interestingly, the tech companies in the Fortune 100 mention innovation in a positive way 16 times (more than double the average of everyone else).

The most aggressive companies about innovation opportunity include:

• Procter & Gamble (with 34 positive mentions)
• IBM (with 27 positive mentions)
• Pfizer and Dow Chemical (both had 25 positive mentions)

The surprise, however, is the inconsistency from industry to industry. A few industries appear to be unconcerned about innovation from an opportunity view or downside view. Those include energy, insurance, banking, and healthcare. One notable exception in those industries is American Express.