Almost half of UK corporates surveyed by Aviva expect to increase their focus on risk management this year, with roughly three quarters planning to make changes to current practices.
The poll of 1,260 business leaders from organisations of all sizes, industries and locations across the UK, finds that a third expect to increase their focus on risk management in 2021. This jumps to 43% for mid-market companies and 49% for corporates.
Meanwhile, 55% of all companies polled said Covid-19 has caused them to take a fresh look at their risk management practices and make changes where it makes sense. Again, this number jumps to 73% at corporates and 66% at mid-market firms.
Some 92% of companies surveyed intend to keep risk management improvements they’ve made because of Covid-19, in a post-pandemic world.
Aviva’s first annual Risk Insights Report also asked respondents to name the top risks facing their companies. The survey by YouGov last September found that public health events, unsurprisingly, came out top. This risk was followed by changes to legislation and regulation, buoyed by Brexit, and business continuity/supply chain interruption.
The top ten risks were
- 1 Public health events – 46%
- 2 Changes in legislation and regulation – 35%
- 3 Business and supply chain interruption – 32%
- 4 Loss of reputation and brand value – 29%
- 5 Cybersecurity and cyber incidents – 27%
- 6 Macroeconomic developments – 26%
- 7 Health and mental wellbeing of employees – 19%
- 8 Shortage of skilled workforce – 17%
- 9 Market developments – 16%
- 10 New and changing technology – 16%
Some 69% of respondents said the long-term impact of Covid-19 will be negative for their business and 39% expected lower growth as a result.
Nearly half (48%) of UK companies surveyed said they have increased their use of digital technology because of the pandemic. And 27% said this poses a significant and growing risk, rising to 36% for large corporates.
Twice as many businesses said the impact of Brexit has been negative than the number that said it was positive. They reported a wide range of risks during a potentially bumpy period as the UK seeks to develop new trading relationships outside the EU.
Aviva’s research shows that three in ten (31%) businesses said they were actively looking to source from local or British suppliers to help ensure greater transparency and control. One in six (17%) business leaders identified a shortage of skilled workers as a top-five risk, reflecting uncertainty over labour supply in post-Brexit Britain.
Climate change was only the 13th-ranked risk, with just 11% of businesses saying it was a top-five concern.Aviva said this suggests that Covid-19, Brexit and business interruption have taken the focus away from climate change risk.
More than one in three (36%) businesses said they were not exposed to any risks as a result of climate change. Those businesses that did recognise climate-related risk said they are most exposed to economic and market threats (29%), followed by regulatory and legal changes (24%), and operational disruption (21%).
Nick Major, interim managing director of commercial insurance at Aviva, said the pandemic has underscored the increasingly interconnected and complex nature of risk. He said the importance of a strategic, proactive programme of risk management and prevention has never been clearer.
“Looking ahead, the challenge for businesses will be to juggle a multitude of pressing risk management priorities – managing the uncertainty of operating in a current pandemic, knock-on risks such as supply chain disruption, emerging risks such as cyber, while not forgetting fire and flood, and the evolving threat of climate change, which in the long-term poses some of the most disastrous risks to business. The ability to manage the immediate threat but retain an eye on the evolving and longer-term risks is going to be critical for business,” added Mr Major.
He said that evolving risks such as cyber and climate change remain the most significant long-term threats for both business and society. “Failure to address the climate emergency now jeopardises our collective future, and UK businesses have a responsibility to act today to ensure a better tomorrow,” he said.
Aviva’s report coincides with the launch of its Aviva Risk Management Solutions website to help all businesses identify, understand and mitigate current and emerging risks. The website can be found at www.aviva.co.uk/risksolutions