Employee risk, reputation and ESG rise up risk agenda for business leaders

The risk landscape for business leaders is changing, particularly around business and executive risks, from employee risk to reputation management to ESG regulation, according to Beazley’s Risk & Resilience report: Spotlight On Business Risks 2023, a survey of 2,000 global business leaders.

The research shows that 42% of global business leaders believe they will be operating in a high-risk environment in six months’ time, up from 31% earlier this year. Over a third (35%) of global executives now plan to explore insurance options that include risk and crisis management as business challenges mount, said Beazley.

Despite the growing threat of external risks facing global boardrooms, Beazley says the survey shows that CEOs and business executives are increasingly concerned by the risks within their organisations. The data reveals how employer risk is rapidly rising up executives’ risk agendas. In 2021, 11% of global executives said this was their top risk but in this year’s survey, it has doubled to 22%, and one in four (27%) executives surveyed said they feel ill-equipped and unprepared to deal with today’s employer risks.

“The research also highlights the interplay between employer risk and reputational risk, with companies increasingly exposed to a potential backlash in the court of public opinion as the treatment of staff is more closely scrutinised,” says Beazley. “The report illustrates how the so-called ‘culture wars’ and increased pressure on organisations to take a stance on societal issues are creating a further reputational challenge.”

Managing reputations will become increasingly tough in the coming months, with 17% of executives ranking this as their top risk today, rising to 19% in 2024.

Bethany Greenwood, group head of specialty risks, Beazley said: “Global business leaders are dealing with a challenging array of new and persistent risks that threaten their business models. It might seem counter-intuitive that executives are increasingly looking inward at their workforce and workplace to meet today’s challenges. However, the last few years have shown us the importance of executive decision making that drives positive change in the workforce and supports colleagues.”

She added: “The continued aftershocks of the ‘great resignation’ post the pandemic, consequences of the ‘culture wars’, and continued scrutiny of the #MeToo movement continue to weigh on firms. This makes sound governance and strong communication from the top more important now than ever before as employers navigate an increasingly polarised world.”

The evolution of ESG regulation across the globe is presenting an increasingly difficult path for businesses, particularly for multinational companies operating in diverging jurisdictions, according to Beazley. More than a fifth (22%) of global business leaders rank ESG as the number one business risk they face now, an increase from 19% in 2022. However, as regulation mounts, one in four (26%) executives feel unprepared to anticipate and respond to ESG risks.

The research shows that failure to comply with new ESG-related requirements, including related legislation or reporting requirements, is of greater concern for business executives in the US and Canada than in the UK and Singapore.

Greenwood added: “The global C-suite faces challenges from many different directions as they chart the right path for their business, employees, and shareholders. While they navigate stormy waters, business leaders need to ensure they have the governance frameworks in place to make the best decisions they can with the information they have at the time. It is no surprise that the role of specialty insurance has grown in importance during this challenging period for firms.”