Denial is a common strategy

Companies and politicians are too preoccupied by short-term problems to notice the more important risks they face, a panel of academic and business experts told the World Economic Forum in Davos yesterday.

"Unfortunately, there is a widespread tendency among many businesses to be well-prepared only for the last event that has occurred - not the next one coming around the corner. Denial is an all-too-common strategy, and there is a natural tendency not to react until the catastrophe is unavoidable," the panel said in a report yesterday.

The experts identified international terrorism, unrest in Iraq, weapons of mass destruction, a disruption of oil supplies and a sudden downturn in China as some of the biggest threats facing businesses.

Mr Fred Bergsten, the director of the Institute for International Economics, said that a sharp rise in oil prices and an uncontrolled drop in the value of the dollar were the most important economic risks to business. He said the US government should make a clear commitment to reducing its budget deficit in order to discourage foreign investors from abandoning the dollar.

Anxiety is high on the agenda at this year's meeting in Davos, with numerous sessions devoted to the rift between Europe and the United States and the threat of a new economic crisis. Despite the unease about global events, nine out of 10 chief executives polled before the meeting said they were "very confident" or "somewhat confident" about the next 12 months.

Dell boss Mr Michael Dell was ebullient yesterday, predicting that his company's growth would outpace the rest of the market in 2005.