Aon’s flagship survey reveals ‘worrisome’ fall in preparedness for leading risks

European companies’ preparedness for the top 10 risks they face has deteriorated and risk readiness of global firms is at an all time low, according to Aon’s 2017 Global Risk Management Survey. The biannual survey of risk decision-makers across the world named damage to reputation/brand as the number one global risk, followed by economic slowdown and increasing competition. Global preparedness for the top 10 risks fell from 58% in 2015 to 53% in 2017. In Europe, the level of preparedness fell from the global average of 58% in 2015 to 47% in 2017. This is just one percentage point higher than Latin America at the bottom of the table for preparedness. Aon said the findings are “worrisome”, particularly given that this year’s report surveyed the largest number of firms since it was launched in 2007. “We have surveyed more people than before and they appear to be less ready to manage the top 10 risks,” the report, which polled 1,843 organisations across 64 countries, says. Political risk has re-entered this year’s survey of top 10 global risks. It was ranked 15th in the 2015 survey, but has moved to ninth position. Aon said that traditional understanding of what constitutes political risk has shifted. “Developed nations, which were traditionally associated with political stability, are becoming new sources of volatility and uncertainty that worry businesses, especially those in the emerging markets,” Aon says. It notes that political risk ranks as more important for firms in the Middle East/Africa, Asia Pacific and Latin America. Cybercrime increased its position in the global list of leading risks from ninth place two years ago to fifth in 2017. Aon says cybercrime is now regarded as a serious threat to companies, with more organised attacks capable of targeting infrastructure and causing business interruption losses. For US companies, cybercrime ranked as the number one risk facing their business. “For survey participants who are risk managers, they have voted it a number two risk, probably because cyber breaches are becoming more regulated, with many companies in the US and Europe facing mandatory disclosure obligations,” the report notes. For European firms, the top 10 risk list shows variations from the global average with economic slowdown ranked as the greatest threat followed by damage to reputation and increasing competition. The top 10 list for European companies includes three threats that do not feature in the global rankings – commodity risk price, counter party credit risk and directors & officers personal liability. Notable omissions from the top 10 European list include political risk, failure to attract top talent and third party liability. Aon also looked at the actual losses incurred from risks. This year’s report finds that despite the decline in risk readiness, losses from the top 10 global risks have decreased. Aon said losses as a percentage of income fell from 27% in 2015 to 24% in 2017, the lowest average loss in the history of the survey. Loss of income fell for several insurable risks such as business interruption, third party liability and political risks. But Aon found that cybercrime caused an increase in losses. Aon introduced disruptive technologies/risks – from 3D printing to robotics – as a new category for 2017. It polled in 20th position this year, but is expected to rise to tenth place by 2020. Economic slowdown is predicted to become the top threat by 2020, while political risk is projected to move further up the rankings and commodity price fluctuation risk is expected to re-enter the top 10. "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, CEO 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," he added. Aon’s 2017 Global Risk Management Survey – Top 10 global risks Damage to reputation/brand Economic slowdown/slow recovery Increasing competition Regulatory/legislative changes Cybercrime/hacking/viruses/malicious codes Failure to innovate/meet customer needs Failure to attract or retain top talent Business interruption Political risk/uncertainties Third party liability (including E&O) Aon’s 2017 Global Risk Management Survey – Top 10 European risks Economic slowdown/slow recovery Damage to reputation/brand Increasing competition Regulatory/legislative changes Failure to innovate/meet customer needs Cybercrime/hacking/viruses/malicious codes Commodity risk price Counter party credit risk Business interruption Directors & Officers personal liability Aon’s 2017 Global Risk Management Survey quizzed risk decision-makers from 33 industry sectors at small, medium and large companies. Risk and insurance managers were most polled, contributing 29% of survey participants.

Aon’s flagship survey reveals ‘worrisome’ fall in preparedness for leading risks

Want to read this article?

Read Next

Munich Re reorganises P&C underwriting in Asia Pacific, Middle East & Africa

Claims likely to increase as vessels remain stranded in Baltimore

Climate change to cause ‘massive economic damage’

Two-paced upstream energy market falls in favour of buyers

Energy insurer Paratus launches brokerage division

Munich Re reorganises P&C underwriting in Asia Pacific, Middle East & Africa

Claims likely to increase as vessels remain stranded in Baltimore

Climate change to cause ‘massive economic damage’

Two-paced upstream energy market falls in favour of buyers

Energy insurer Paratus launches brokerage division

Want to read this article?

Read Next

Munich Re reorganises P&C underwriting in Asia Pacific, Middle East & Africa

Claims likely to increase as vessels remain stranded in Baltimore

Climate change to cause ‘massive economic damage’

Two-paced upstream energy market falls in favour of buyers

Energy insurer Paratus launches brokerage division

Related Articles