How risk-ready is your organisation?

Aon’s latest Global Risk Management Survey (the survey) uncovered the global economic and trade concerns that have caused companies’ risk-readiness to hit an all-time low and impacting the C-suite’s ability to manage volatility and maximise performance.

Surveying 2,672 respondents in 60 countries over 33 different industries in both public and private companies of all sizes, the survey is the biggest of its kind in the world; and this year surveyed the most respondents to ever participate.

Why does Aon conduct the survey?

The survey collates a significant amount of data, which offers organisations extraordinary insight into risk and risk management. The results enable better management of risk-related volatility and competition in an increasingly complex business environment; and provides a ‘deep dive’ into what our clients view as their key risks, their levels of risk readiness, and the risks likely to grow in importance in the next few years. 

In particular, the 2019 survey findings highlighted the issues faced by companies grappling with new risks and the difference of opinion on how to best prioritise and respond to them.

What risks are on the horizon?

A key insight from the survey is the need for organisations to be better prepared for the broad range of risks which threaten their ability to continue growth, protect their brand and service clients and stakeholders.

Respondees discussed their apprehension about global trade conditions, and in particular:

  • a slowing economy;

  • concern about damage to their companies’ reputation and brand; and

  • accelerated rates of change in market factors.

In a weakening economic environment, companies are more sensitive to volatility, particularly from emerging risks such as cyber-attacks, business interruption from non-physical threats and a shortage of skilled workers. These risks are less well understood, as there is less experience and less data available to help manage them. As a result, risk readiness has declined to its lowest level in 12 years.

Adding to the list of existing concerns are:

  • the implications of an aging workforce;

  • the impact of climate change;

  • the growing prevalence of cyber-attacks; and

  • the emergence of ever more disruptive technologies.

How are leaders preparing for the unknown?

Many organisations have yet to capitalise on the new tools and approaches that could help them systematically identify and assess risks as they develop protection and mitigation strategies:

  • Only 24 percent of respondents said they quantify their top 10 risks;

  • Only 20 percent use risk modelling; and

  • 10 percent of respondees said they had no formalised process in place to identify risks. 

The most effective organisations will approach these challenges holistically. They will involve leaders from throughout their organisations to provide a broad base of views and expertise and then apply sector-specific data and predictive analytics to support the decisions they make. This is an opportunity for risk managers to lead the evolution of their businesses toward truly addressing risk at the enterprise level.

Key Findings

Asia/Pacific Top 10 Risks

Companies surveyed in the Asia/Pacific region consider reputational damage is the number one risk (driven by sanction violations and criminal charges against brands and officers in the region). The top 10 list reads as follows:

  1. Damage to Reputation/Brand;

  2. Increasing Competition;

  3. Business Interruption;

  4. Economic Slowdown/Slow Recovery;

  5. Accelerated Rates of Change in Market Factors;

  6. Cash Flow/Liquidity Risk;

  7. Cyber Attacks/Data Breach;

  8. Failure to Innovate/Meet Customer Needs;

  9. Regulatory/Legislative Changes;

  10. Failure to Attract or Retain Top Talent.

Global Top 10 Risks

At the height of the global financial crisis a decade ago, Economic Slowdown/Slow Recovery was considered the number one risk. Fast forward to 2019 and it is back in the top spot. This time, it’s connected to accelerated rates of change in market factors, globalisation, and geopolitical uncertainty:

  1. Economic Slowdown/Slow Recovery;

  2. Damage to Reputation/Brand;

  3. Accelerated Rates of Change in Market Factors;

  4. Business Interruption;

  5. Increasing Competition;

  6. Cyber Attacks/Data Breach;

  7. Commodity Price Risk;

  8. Cash Flow/Liquidity Risk;

  9. Failure to Innovate/Meet Customer Needs;

  10. Regulatory/Legislative Changes.

How have global results changed compared to previous years?

Economic slowdown/slow recovery

Ranked number 1 for the first time since 2013.

The lowest reported average level of risk readiness for the current top 10 risks, which has dropped from 53 percent in 2017 to 51 percent in 2019.

Accelerated rates of change in market factors

Jumped to number three from 38 in 2017.

Only predicted to rise about 6 ranks in 2019, but the increasingly volatility of many interconnected market factors has substantially affected businesses around the world and led to the rapid and unexpected rise.

Business interruption

Rose from rank 8 to 4

Increasing awareness of cyber risk and the repercussions of cyber attacks across the globe, as well as massive increase in insured losses due to natural catastrophes.

Cyber attacks/breach

Stayed at the top for North American participants but dropped to number 6 globally.

Participating risk managers around the world ranked it the number 1 risk.

Set to become even more important by 2022, predicted to be in the top 10 across all regions including Latin America, where it is currently ranked 14.

Loss of intellectual property/data

Slid to number 34.

Between 2011 and 2017, this risk hovered in the 20s. This shows that the value of intangible assets is still not fully understood across organisations. We believe this is something that is fast changing, but may account for the relative ranking, given the profile of survey participants who are not the traditional buyers of IP solutions, and see the chance for further education to build awareness with this audience.

Ageing workforce & health related issues

Ranked 20 in 2019, up from 37 in 2017.

Predicted to rise to number 13 by 2022.

Disruptive technologies

Added as new risk category in 2017, has moved from number 20 to number 14.

Predicted to rise to number 12 by 2022.

View the full report here

The robust representation of the 2019 survey has enabled Aon to provide insight into risk management practices by geography and industry, and validated the data applicable to all industries. Aon has the expertise to develop innovative solutions for clients, leveraging data and analytic capability to prepare clients for the future. We will continue to partner with you, our clients, working side-by-side to improve operating performance, strengthen balance sheets and reduce volatility.

 

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