Economic risk is the greatest threat today’s business leaders face, followed by legislative and regulatory changes and increased competition.
Business leaders across the globe also emphasized the need to innovate, mitigate technology failure and manage talent to compete in the future, according to the findings of Aon’s 2011 Global Risk Management Survey.
The web-based biennial report was released today by Aon Risk Solutions at the Risk and Insurance Management Society (RIMS) convention in Vancouver.
Sixty-seven percent of the nearly 1,000 business professionals from 58 countries who participated in the survey reported loss of income in the last 12 months associated with economic risk.
“The findings shared in our report underscore the undeniable interdependence among various risks as well as economies around the globe,” George Zsolnay, head of Aon Analytics in the U.S., said. He said it is more important than ever for organizations employ an enterprise-wide approach to managing risk on a global basis.
For the first time in survey history, failure to innovate/meet customer needs made the top 10 list of global risks, debuting at number six. The report says this reflects growing concern about the risk of losing market share to more forward-looking competitors.
Technology failure/system failure also earned its first top 10 spot, ranking ninth on the list. Technology concerns lead to fears about additional risks, including business interruption and damage to brand, which are also found on the report’s top 10 list.
“Throughout the economic recession, many organizations pulled in their oars – tabling research and development projects, decreasing spend on information technology and freezing hiring,” said Constantin Beier, global head of Aon Analytics and chief commercial officer of Aon’s Center for Innovation and Analytics in Dublin. “Today, business leaders are realizing this strategy won’t work in the long term. Organizations must begin reinvesting in fundamental areas such as these if they are to survive and thrive.”
Failure to attract/retain top talent ranked at the bottom of the top 10 risks list in 2009, a time when companies were experiencing hiring freezes and layoffs. In 2011, this risk is viewed as more acute, taking the number seven spot on the list. The majority of respondents (60 percent) reported they do not have a plan in place to handle this risk, and a trivial number (4 percent) said they are seeking outside support for recruitment and retention strategies.
Aon’s 2011 Global Risk Management Survey Top 10 Risks
- Economic slowdown
- Regulatory/legislative changes
- Increasing competition
- Damage to reputation/brand
- Business interruption
- Failure to innovate/meet customer needs
- Failure to attract or retain top talent
- Commodity price risk
- Technology failure/system failure
- Cash flow/liquidity risk
As companies struggle to contain cost in a post-recession era, they are more willing to sacrifice flexibility and innovation for broader coverage and better terms and conditions.
Only 39 percent of respondents measured their total cost of risk, down from 44 percent in 2009. The report says failure to track or manage all aspects of TCOR could be detrimental to an organization in the long term. As the economy recovers and the soft market dissipates, more organizations are expected to track TCOR.
The chief risk officer role is a growing trend. Thirty-one percent of respondents reported having a CRO, up from 25 percent in 2009. This finding represents the realized value of having risk officers in the c-suite and the emerging acceptance of risk management as a core function of business success.
For the third straight survey, financial stability was cited as the top criterion in an organization’s choice of insurers. The desire for competitive pricing was tempered this year by an interest in dealing with carriers that have the financial capacity to pay claims.
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