How good is your crystal ball? (Business).

It's a dangerous world out there and we're not just talking about war and terrorism. CEOs may not even be prepared for basic business developments such as competitors that appear to emerge from nowhere.

That's the conclusion Fuld & Co. has reached on the basis of a year-long survey of 140 corporate strategies from Global 2000 companies. Fully 97 percent of respondents said their top brass have no formal early warning systems to anticipate potential competitive threats.

The No. 1 fear these companies have is rivals entering their markets with new products or services, though of course there are many other risks as well (see table). "Companies are really lax in this area," says the bespectacled Leonard Fuld, whose Cambridge, Mass.-based firm has been a leader in corporate intelligence issues.

"Companies do have managers of risk," he explains. "But that's often a numbers-crunching game. What you really need is someone looking over the horizon to see where shifts are taking place in areas you're interested in. Companies lack the disciplines and tools to do that."

What Fuld urges CEOs to consider is a formal process of analyzing different scenarios, akin to war-gaming. When a company's top management understands the various scenarios it faces, then it can identify the "signals" to watch to anticipate risks.

One company Fuld recently helped in doing this is Visa International, which was worried that Internet-based rivals would challenge it. The different scenarios included: What if we acquire the rivals? What if they fold? What if they expand? For each scenario, Visa identified the following signals: whether the rivals were signing up merchants whether they were expanding advertising revenue in certain areas; and whether the traffic to their Web sites was increasing. The threat didn't prove to be as serious as Visa had feared, but the company had the comfort of being able to analyze specific signals.

Should a CEO take part in war-gaming? "This is a senior management concern," Fuld argues. "This is not a concern that a middle manager can handle. It's a C-level topic."

In his view, top managers need to set the agenda. "Management has to get their hands dirty and ask, 'What might really happen and what are the signals we have to watch?"' he says. "Then it's somebody else's job to monitor."

Of course, top management has to respond well to the news, even if it's bad. Nearly half of survey respondents said top management doesn't take bad news seriously, denies it or, in some cases, shoots the messenger.

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