BY Richard Summerfield
Due to a challenging economic and trade outlook, companies are finding it increasingly difficult to invest sufficiently in preparing for risk and protecting the continuity of their operations, according to Aon’s 2019 Global Risk Management Survey. Aon surveyed thousands of risk managers across 60 countries and 33 industries to identify the key risks and challenges their organisations are facing.
Economic slowdown is highlighted as the chief risk facing companies today. Others include the possible impact of Brexit, higher US interest rates, slowing growth in Europe, China, Japan and many emerging markets, the highly charged geopolitical climate, and diminishing prospects for further economic expansion in the US.
The escalating China-US trade war is also a cause for concern, with the International Monetary Fund (IMF) cutting its economic growth forecasts for both countries in October. According to the IMF, growth in the US will slow from 2.9 percent to 2.5 percent in 2019, and China’s GDP would drop to 6.2 percent.
“Companies of all sizes are struggling to prioritise their risk management efforts amid so much change and uncertainty,” said Rory Moloney, chief executive of global risk consulting at Aon. “What was once a tried-and-true strategy for risk mitigation – using the past to predict the future – is now a challenge and coupled with a more competitive global economy, it is causing an all-time low level of risk readiness. As a result, risk management plans need to take a different approach than they have in the past.”
Damage to a brand’s reputation, business interruption and cyber attacks have also emerged as key concerns for many organisations. Though cyber attacks have only featured in Aon’s top 10 risks since 2015, they have quickly grown to be perceived as one of the most pressing issues of the day. Indeed, for North American respondents, cyber attacks are now the number one risk.
The elevation of new risks has become a common theme in the recent years. The speed of technological change, aggressive regulatory actions, product recalls, an active cycle of devastating natural disasters and corporate scandals are disrupting supply chains and business operations.
As a result of these rapid and paradigm-shifting changes to the risk management landscape, risk managers are reporting their lowest level of risk readiness in 12 years, since many of the top risks are uninsurable.
Risk managers must evolve with the times if they are to protect their organisations. “The use of data and predictive analytics that can generate actionable insights, will help businesses protect their bottom lines while adapting to accelerated change and economic fluctuations,” said Mr Moloney.