Australia
Cyber risk: Emerging yet underrated threat in local government

Cyber risk: Emerging yet underrated threat in local government


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SYDNEY (March 23, 2016) – While cyber is quickly rising to the top of the corporate risk agenda, it remains an underrated threat amongst local councils, according to Aon’s latest Australian Local Government Risk Report.

The threat of cyber ranked outside the list of top ten risks for local governments, despite its potential for serious business interruption and financial loss, as well as its ramifications for directors and officers in terms of the Privacy Act.

Financial sustainability and stability, the number one risk in 2015, is still perceived as the primary risk concern for local government in Australia. On the contrary, damage to reputation has emerged as a new risk, reflecting new community concerns related to performance or behaviour of councils.

Top 10 risk concerns to Australian local government:

  1. Financial sustainability and stability
  2. Infrastructure
  3. Weather
  4. Population change
  5. Asset protection
  6. Human resources
  7. Funding
  8. Environmental
  9. Merger
  10. Reputation

“While it is little surprise that the top identified risk is a financial driver, the low rating of cyber risk is alarming. Councils, regardless of physical location and size, are increasingly under threat of cyber-attack and the malicious motives of hackers,” said Paul Crapper, National Head of Local Government, Aon.

A further ongoing risk management concern for local government is the relatively high level of attritional loss claims, particularly trips and fall injuries. A focus on reducing claims of this nature will help to alleviate premium pressures and, result in more attractive assets to insurers, while providing councils with broader options and a safer municipality for the community.

“Effective risk management is a balance between meeting ratepayer demands for increased services with the impacts of cost shifting, rate capping and amalgamations,” added Mr. Crapper.

The report also reveals a shift in the distribution of insurance placement, which indicates an emerging commercial market that provides councils with greater value for money and significant savings. These savings can then be utilised for programs and projects that deliver additional community benefit.

While mutual schemes continue to dominate the local government insurance market, nine percent of councils surveyed have now moved to the commercial market, a figure that is expected to grow up to 25 percent in 2017, implied by the number of councils currently testing this market.

“The reality of mutual insurance schemes is that they offer a ‘one size fits all’ solution. No one council has the same risks, needs or structure and, with such high levels of diversity, each should be considered individually, with insurance policies tailored to the individual needs of that council,” said Mr. Crapper.

“In such a highly regulated environment, with a changing financial landscape, risk engineering is becoming increasingly important to assist councils in managing their assets and developing effective, efficient and financially sustainable risk transfer solutions,” he concluded.

The Local Government Risk Report 2016 was a benchmarking survey into the key risk concerns and risk management practices of Australian local councils, completed by more than 100 local government risk management executives.

The full report is available at connect-aon.com.au.

About Aon
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 72,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global and principal partnership with Manchester United.


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