Trends in economics, demographics and geopolitics along with rapid technology advancements are transforming traditional risks for global businesses, adding new urgency and complexity to old challenges, according to Aon's 2017 Global Risk Management Survey.
Key findings from the survey include:
- Damage to reputation/brand remained the top ranked risk by businesses. While defective products, fraudulent business practices and corruption continue to be key threats to reputation, social media has greatly amplified their impact, making companies more vulnerable. Additionally, risks that are traditionally uninsurable are becoming more volatile and difficult to prepare for and mitigate.
- Dramatically rising in the ranks from number nine to number five this year, cyber crime has now joined a long roster of traditional causes that can trigger costly business interruptions. It is now the top concern among businesses in North America, as the frequency of cyber breaches are increasing and incident response plans have become more complex due to regulation and mandatory disclosure obligations. This trend of disclosure obligations is also being observed internationally, for example with the EU General Data Protection Regulations going into effect in 2018. As a result, cyber concerns will continue to be significant for businesses.
- Political risk/uncertainties, previously ranked at number 15, has now re-entered the top 10 risk list at number nine. At the same time, risk readiness declined from 39 percent in 2015 to the current 27 percent.
- Developed nations that were traditionally associated with political stability are becoming new sources of volatility and uncertainty. This is a concern for businesses, especially those operating in emerging markets.
- Distribution or supply chain failure has dropped to its lowest ranking since 2009, falling from number 14 to number 19.
- Business interruption is not considered a top 10 risk by companies in the Middle East/Africa, which have historically seen higher exposure to incidents that interrupt business operations.
Top ten risks
The top 10 risks as identified by the Aon 2017 Global Risk Management Survey are:
- Damage to reputation/brand
- Economic slowdown/slow recovery
- Increasing competition
- Regulatory/legislative changes
- Cyber crime/hacking/viruses/malicious codes
- Failure to innovate/meet customer needs
- Failure to attract or retain top talent
- Business interruption
- Political risk/uncertainties
- Third party liability (including E&O).
Conducted in the fourth quarter of 2016, Aon's 2017 Global Risk Management Survey gathered input from 1,843 respondents at public and private companies around the world.
The full report can be accessed at www.aon.com/2017GlobalRisk