Economic and global-trade concerns are challenging businesses’ ability to protect the continuity of their operations, according to Aon’s 2019 Global Risk Management Survey. A rising number of uninsurable risks that threaten firms mean that a new approach to risk is needed.
“Companies of all sizes are struggling to prioritise their risk management efforts amid so much change and uncertainty,” said Rory Moloney, chief executive officer of Aon's Global Risk Consulting business. “What was once a tried-and-true strategy for risk mitigation – using the past to predict the future – is now a challenge. Coupled with a more competitive global economy, it is causing an all-time low level of risk readiness. As a result, risk management plans need to take a different approach than they have in the past.”
Thousands of risk managers across 60 countries and 33 industries are surveyed every two years by Aon plc, a leading global professional services firm providing a broad range of risk, retirement and health solutions, to identify key risks and challenges faced by organisations.
In the 2019 Global Risk Management Survey, respondents ranked economic slowdown as their no. 1 risk. Damage to reputation/brand was cited as the no. 2 concern, reflecting the potential for significant consequences when corporate mishaps occur in a 24/7 news cycle on social medial platforms. Accelerated rates of change in market factors stemming from an increase in protectionist international trade policies, which include rising regulatory activity and geopolitical tension, jumped from number 38 in the previous survey to number three on the 2019 list.
Aon obtained responses for their 2019 Global Risk Management Survey last autumn, during a time of enormous uncertainty around the globe, fuelled by sharp stock market declines, trade policy disputes, aggressive regulatory actions, massive recalls, devastating natural disasters, far-reaching cyber-attacks and corporate scandals. These broader macroeconomic risks, combined with the speed of technology change, are contributing to a growing prominence of new threats that can disrupt supply chains and overall business operations. As a result, one-third of the top 15 risks are new entrants to the top 15 list. These include accelerated rates of change in market factors and disruptive technologies.
Risk managers are reporting their lowest level of risk readiness in 12 years, as many of the top risks, such as economic slowdown and increasing competition are uninsurable. As a result, risk managers need to embrace risk management as opposed to risk transfer to mitigate these threats and protect their organisations from potential volatility.
“The changes in this year’s survey results indicate that the risk management function must evolve to reach the enterprise level,” said Mr Moloney. “This, combined with the use of data and predictive analytics that can generate actionable insights, will help businesses protect their bottom lines while adapting to accelerated change and economic fluctuations.”
Ageing workforce as a risk has risen from 37th in the 2017 ranking to 20th in the current one. It is predicted to rise a further seven places by 2022. Overall, ageing populations coupled with workforce shortages change the social and economic trajectory of a country, and create volatility within organisations.
Climate change moved from a 45th in 2017 to 31st in 2019, as the frequency and severity of natural catastrophes contributed to rising concerns about their impact on the global economy.
Cyber-attacks/data breaches rank globally as the no. 6 risk and are expected to jump to become the third-highest overall risk in 2022. Cyber continues to hold the top spot among those responding from North America. For the first time, cyber risk is predicted to make it into the Top-10 list for Latin America. It is also predicted to rise in Europe from 8th to 4th, and in the Middle East and Africa from 8th to 2nd.
Disruptive technologies are a growing concern for survey respondents, rising from a ranking of 20 in 2017 to 14 in 2019 globally. This trend is cited as a Top 10 risk for 50% of all industry sectors.
Participant profiles in Aon’s 2019 Global Risk Management Survey encompassed small (below $1 billion turnover), medium ($1 billion - $15 billion) and large (above $15 billion) organisations, including respondents from privately-owned companies, public organisations, government and not-for-profit entities. The full report can be accessed at www.aon.com/2019GlobalRisk.
This September, Aon will publish a local report, based on respondents' answers from Poland, the BPCC looks forward to publishing the key results.
Aon plc Aon is a leading global professional services firm providing a broad range of risk, retirement and health solutions. 50,000 employees in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.