Fortifying the Castle

Finance and business classes teach Morningstar’s Economic Moat framework to help aspiring executives understand competitive advantages.

Originating with Warren Buffett, the concept encompasses Morningstar’s two decades of proven insights that C-suites, boards, and investors rely on to assess what sets a business apart and for how long.

Under this framework, a moat driver—any force that protects a competitive edge and is difficult to replicate—must prove durable over time. Excellent workforce management is important but doesn’t qualify because it’s hard to sustain and can be replicated by competitors.

But could poor workforce management, including the failure to maintain safe conditions and prevent injuries, threaten a moat? With deal activity accelerating and enterprise value under growing scrutiny, we wanted to find out. We spoke to 700 CFOs and risk managers across private equity-backed and independently owned organizations in manufacturing, construction, life sciences, and technology. We used Morningstar’s Economic Moat framework to guide the discussion and understand where risk professionals see durability.

The Paradox

The leaders interviewed consistently cited workforce capabilities, including specialized skills, expertise, and culture, as their top source of competitive advantage. Yet workforce ranked among the lowest for durability. Leaders recognize their people are critical to a competitive edge, yet question whether their processes are designed to protect employees.

Finance leaders could dismiss this as a human resources concern. However, long-term competitive advantages depend on consistent execution, institutional knowledge, and operational resilience. When the workforce is unstable or unsafe, the moat erodes. Expertise walks out the door. Turnover and retraining drive costs. Inconsistent execution weakens customer loyalty.

Safety is Strategy

Across every industry we surveyed, the greatest identified workforce-related threat to competitive advantage isn’t technology disruption or recruiting difficulty. It is the ability to maintain consistent safety practices and reduce workforce injuries.

Safety has moved beyond compliance to become a competitive strength. Midsize businesses cite being unable to maintain safety consistently and reduce injuries as their No. 1 threat to competitive advantage. Large companies, by contrast, say a breakdown in communication between leadership and front-line teams is the No. 1 barrier to implementing a safety strategy. Nearly 40% of large companies, the highest of any size segment, also struggle with measuring whether their safety strategy is working.

Reframing safety as a competitive advantage has implications for how brokers advise their clients. Certain lines of coverage, especially workers compensation, are easy to treat as commodities. Policies can appear homogenous, coverage differences are hard to articulate, and conversations can default to pricing. When brokers understand how safety practices affect enterprise value and talent retention, they can use data and strategic insight to steer workers compensation conversations toward business outcomes rather than price.

That value is substantial. Clients that invest in safety culture are protecting more than their loss ratios. They are supporting talent retention, reinforcing their reputation as a great employer, and compounding enterprise value over time. The ability to outperform competitors comes from protecting new hires, developing supervisors who can effectively implement safety programs, and managing injuries before they become operational disruptions, all of which compound into a workforce that is difficult to replicate.

The Alignment Opportunity

The most actionable finding in our research is the misalignment between CFOs and risk managers over priorities. Risk managers, closer to operations, are concerned with safety implications of those operations. CFOs point to talent retention and measurement gaps as potential barriers to execution, including retaining experienced workers when safety culture falters and knowing whether safety investments work. When the people controlling the budget and those managing risk are diagnosing different problems, funding can follow the wrong priorities.

That gap can erode the competitive advantages companies are trying to protect. Helping CFOs and risk managers align around the organization’s most significant risks distinguishes a trusted advisor from a transactional broker.

A Forward-Looking Conversation

Workforce-risk practices that make companies attractive to buyers also protect competitive position in a downturn.

Waiting until clients intend to sell to foster these conversations may not be in their best interest, particularly at this inflection point for deal activity. PitchBook estimates that over $4 trillion in global private equity dry powder is poised for deployment, and enterprise value is under scrutiny. The next wave of transactions could reward companies that demonstrate operational resilience, not just financial performance. Organizations investing in their risk management infrastructure will be better positioned to attract buyers, command high valuations, and sustain the competitive advantages that protect long-term value.

To explore the full findings from The Travelers 2026-2027 Competitive Advantage Study, visit travelers.com/competitiveadvantage