Reputation, supply chain and cyber pose biggest risks to global retailers, reveals WTW survey

Global retailers are finding it hard to get the right insurance at an acceptable price as the range of risks facing the sector grows, according to WTW. Following a survey of 700 risk managers and senior decision-makers at retailers across the world, 44% cited high deductibles as a barrier to securing cover, 36% historic loss experience and 32% lack of risk or claims data. “This may be leaving businesses dangerously exposed,” WTW warns in its Global Retail Risk Outlook 2024. The survey polls food and supermarkets, luxury and fashion, department stores, health and beauty, electronics, home and DIY and online-only retailers in Europe, North America, Asia Pacific, Latin America, the Middle East and Africa. Brand and reputation risk polled as the greatest threat to success over the next three to five years, named by half of firms surveyed. In particular, WTW says retailers are nervous about the role of online influencers and brand ambassadors in driving sales, opening up the brand to social media controversy. Almost half (45%) named disgrace of a celebrity endorser as the biggest reputation risk, just behind cyberattack at 51%. Supply chain followed as the second-biggest threat to retailers, named by 47% of retailers. Concerns were highest for online-only retailers at 65%. Supply chain worries were led by natural disasters (44%), product recalls (43%), warehouse fires (44%), shipping problems (42%) and raw materials shortages (40%). “Recent attacks on shipping in the Red Sea demonstrate how quickly supply chains can be disrupted,” WTW says. Opportunities to revolutionise the supply chain using AI also brings risks. “Relying on AI and automation to predict demand, manage stock and speed deliveries can increase the risks of technical faults and cyberattacks, leading to supply chain disruption,” WTW warns. It urges firms to implement robust cybersecurity, diversify their technology providers, and carry out regular risk assessments to identify and address potential disruption. Cyber risk polled as the third-biggest threat to retailers, named by 43% of respondents. Retailers are expanding their IT footprint with the use of AI and virtual reality, which simultaneously opens up new risks. “With more and more commercial and customer data being stored, a data breach can be very costly to a business and its reputation, whether caused by a cyberattack, employee error or system failure,” WTW says. Retailers experienced massive business interruption (BI) during the pandemic and BI risk ranked fourth on 42%. “As this resulted in losses not linked to property damage, few of those losses were covered under traditional insurance policies. Potential exposure to uninsured risk in the event of another system shock may explain why 42% named business interruption as one of their greatest business risks,” WTW says. The survey also reveals confidence in the longevity of physical stores. The majority of respondents (84%) say they will have a mix of physical stores in three to five years’ time, including 7% of online-only businesses today. WTW says despite challenging trading conditions, retailers expect their strategies to reap rewards in the near term. Some 58% think they will be a little or a lot more profitable within two years and only 8% expect to be less profitable. Garret Gaughan, head of direct and facultative at WTW, said: “It is reassuring to see that the retail industry is very upbeat about the future and embracing new technology such as AI while maintaining a healthy awareness of the risks that go with this. “It will be crucial, though, that businesses navigate this new digital world safely. Public confidence and reputation are hard won and swiftly lost, and by embracing tech and the digital landscape, businesses need to be aware they need to protect themselves in new ways.”

Reputation, supply chain and cyber pose biggest risks to global retailers, reveals WTW survey

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