Unprecedented volatility adds new urgency and complexity to old risks, reports Aonâ€™s 2017 Global Risk Management Survey
Bi-annual survey finds economics, demographics and geopolitics as well as technology advancements creating new reality for companies around the world
- Damage to reputation/brand is top concern for businesses, exacerbated by social media
- Political risk/uncertainties re-entered top 10 risk list largely driven by persistent and escalating tumult around the world
- Cyber crime enters top 10 risk for businesses in Australia for first time at Number 5
- Disruptive technologies/innovation is predicted to be in top 10 risk list by 2020
- Risk preparedness is at its lowest level since the survey’s inception in 2007
LONDON (24 April 2017) â€“ Trends in economics, demographics and geopolitics along with rapid technology advancements are transforming traditional risks for global businesses, adding new urgency and complexity to old challenges, according to Aon’s (NYSE:AON) 2017 Global Risk Management Survey.
Damage to reputation/brand remained the top ranked risk by businesses. While defective products, fraudulent business practices and corruption continue to be key threats to reputation, social media has greatly amplified their impact, making companies more vulnerable. Additionally, risks that are traditionally uninsurable are becoming more volatile and difficult to prepare for and mitigate.
Dramatically rising in the ranks from number nine to number five this year, cyber crime has now joined a long roster of traditional causes that can trigger costly business interruptions. This is even more evident in Australia where cyber crime entered the top 10 for the first time at number 5, as the frequency of cyber breaches increase and the implementation of mandatory disclosure obligations looms ever closer on the horizon. This trend of disclosure obligations is also being observed internationally, for example with the EU General Data Protection Regulations going into effect in 2018. As a result, cyber concerns will continue to be significant for businesses.
Political risk/uncertainties, previously ranked at number 15, has now re-entered the top 10 risk list at number nine. At the same time, risk readiness declined from 39 percent in 2015 to the current 27 percent. Interestingly, developed nations that were traditionally associated with political stability are becoming new sources of volatility and uncertainty. This is a concern for businesses, especially those operating in emerging markets. Additionally, according to Aon’s latest 2017 Risk Maps, which covers Political Risk, Terrorism and Political Violence, trade protectionism is on the rise while terrorism and political violence ratings are the highest they have been since 2013.
“We are living in a challenging new reality for companies of all sizes around the world. There are many emerging influences that are creating opportunity, but at the same time, creating risks that need to be managed,” said Rory Moloney, chief executive officer for Aon Global Risk Consulting. “As the risk landscape for commerce evolves, businesses can no longer rely solely on traditional risk mitigation or risk transfer tactics. They must take a cross-functional approach to risk management and explore different ways to cope with these new complexities.”
Disruptive technologies/innovation is an emerging risk that participants ranked at number 20 this year but anticipate it to be in the top 10 list of risks by 2020. With the recent introduction and adoption of new technologies, such as drones, driverless cars and advanced robotics, businesses have an increased awareness of the impact of innovation. Respondents from several industries - not just the technology sector - realise the significance of potential disruptors from within their own industry as well as outside their industry.
- Moderate global economic growth offered organisations reason for cautious optimism, which resulted in economic slowdown/slow recovery dropping to the number two slot in the top 10 risks list.
- Increasing competition moved up to number three this year. In many cases, competition has become so fierce that it is increasingly challenging for executives to clearly identify in what industry and with which companies they are competing.
- Property damage, which was ranked number 10 in 2015, has slipped to number 13. This could reflect changing priorities, as political risk/uncertainties has taken on a new urgency.
- Distribution or supply chain failure has dropped to its lowest ranking since 2009, falling from number 14 to number 19.
Conducted in the fourth quarter of 2016, Aon’s 2017 Global Risk Management Survey gathered input from 1,843 respondents at public and private companies around the world, making it the largest response since the survey’s inception as well as one of the most comprehensive surveys of its kind. The full report can be accessed at www.aon.com/2017GlobalRisk
About the 2017 Aon Global Risk Management Survey
Aon’s 2017 Global Risk Management Survey is designed to offer organisations insights to compete in an increasingly complex business environment. Conducted bi-annually, the survey gathered input from 1,843 respondents at public and private companies from around the world. The 2017 findings from the survey, which was conducted in 10 languages and completed by respondents from multiple countries, underscored that companies are grappling with new risks and that there are differences of opinion on how to best prioritize and respond to them.
The top 10 risks are:
1. Damage to reputation/brand
2. Economic slowdown/slow recovery
3. Increasing competition
4. Regulatory/legislative changes
5. Cyber crime/hacking/viruses/malicious codes
6. Failure to innovate/meet customer needs
7. Failure to attract or retain top talent
8. Business interruption
9. Political risk/uncertainties
10. Third party liability (including E&O)
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