“Risk leaders are struggling to identify and manage the major risks facing their organizations,” according to the biannual Aon Global Risk Management Survey released by Aon Risk Solutions, the global risk management business of Aon plc.
The report identifies the top 10 risks as well as hidden risks facing organizations today, illustrating the importance of no longer evaluating risk in isolation but considering the relation of risks to establish and maintain a successful risk management program.
The survey identified the following as the “Top 10” risks for 2013 and where they were expected to be ranked in 2016:
Risk Description —————-Risk rank 2013 —Risk rank 2016
Economic slowdown/slow recovery —— 1 ————1
Regulatory/legislative changes———2 ————2
Increasing competition —————-3 ————3
Damage to reputation/brand ————4 ————8
Failure to attract,retain top talent –5 ————5
Failure to innovate/customer needs —-6 ————4
Business interruption —————–7 ————11
Commodity price risk ——————8 ————7
Cash flow/liquidity risk ————–9 ————10
Political risk/uncertainties ———-10 ———–6
Aon said the survey “points to a significant decline in risk readiness among many of the survey respondents. On average, reported readiness for the top 10 risks dropped a material 7 percent (from 66 to 59 percent) from the 2011 survey and reported loss of income increased 14 percent. Of the 28 industries defined in the report, only three industries – pharmaceutical and biotechnology, non-aviation transportation manufacturing and agribusiness – reported the same or improved levels of readiness this year.”
Stephen Cross, chairman of Aon Global Risk Consulting said: “One possible explanation of the decline in risk readiness could be that the prolonged economic recovery has strained organizations’ resources, thus hampering the abilities to mitigate many of these risks. Our survey revealed that, despite diverse geographies, companies across the globe shared surprisingly similar views on the risks we are facing today – whether or not they feel prepared.”
Aon also reported that the number of respondents to its latest survey jumped “to more than 1,400 – a 47 percent increase” from its 2011 survey. Aon said “this indicates that companies continue to have a higher level of attentiveness to risk management. The 2013 survey ranked the top 50 risks companies face, focusing on the top 10 risks in 2013 and how they may change in 2016.
“Economic slowdown/slow recovery, regulatory/legislative changes and increasing competition are not surprisingly the top three risks in 2013 and 2016. These risks also take top spots on the risk rankings for the survey’s five main regions, which include Asia Pacific, Middle East and Africa, Europe, Latin America and North America. These same three risks are also among the top risks for 24 of the 28 industries surveyed. This ranking reflects the systemic nature of these risks and the high interdependence of global economic activity.
“Political risk/uncertainties broke into the top 10 risks for the first time in 2013. Due to the increasing civil wars and social and political conflicts around the world, this risk is projected to move up to number six in the 2016 survey.
“Weather/natural disasters, while not far off the radar at a current ranking of number 16, is also projected to jump into the top 10 list at number nine, given the unusual climate patterns worldwide and an unprecedented increase in natural disasters and weather events.”
Finally the Survey found that “failure to innovate/meet customer needs is an increasing priority, projected to jump from number six to number four in the next three years. Business interruption is expected to drop out of the top 10 risks due to companies’ efforts to improve business recovery planning.”
The 2013 Aon Global Risk Management Survey also uncovered several significant risks to watch, as these are “perceived to be underrated risks.” They include the following: Computer crimes/hacking/viruses/malicious codes; counter party credit risk; loss of intellectual property/data; social media and pension scheme funding.
Javier Gimeno, the Aon Dirk Verbeek chaired professor in international risk and strategic management at INSEAD, who reviewed Aon’s survey, added: “As part of the board’s responsibility to endorse and monitor strategy, directors should gain an intimate understanding of the major strategic risks, possible scenarios and how the appropriate strategy allows the exploration of uncertainties and mitigation of strategic risks.
“Given the results of Aon’s 2013 Global Risk Management Survey, developing capabilities for strategic risk management by top management teams and boards should be an important priority in these uncertain times.”
Risk decision makers are invited to participate in the survey and will receive a complimentary customized report based on their industry, geography and revenue size. To register for a copy of the Aon Global Risk Management Survey report as well as participate in the survey, go to: www.aon.com/2013GlobalRisk.
Source: Aon Risk Solutions
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