Regardless of industry, geography or size, one thing is certain: Risks to organizations are changing, becoming more complex and are more interrelated than ever before.
“An organization’s ability to identify, assess and respond to the key risks that it faces is critical to its sustainability. The companies that excel in this area are the ones that will be able to react quickly to new challenges,” says Kevin Pastoor, managing director at Aon Risk Solutions.
“The first step is identifying the top risks to your organization, and Aon’s Global Risk Management Survey is an excellent place to start.”
Smart Business spoke with Pastoor about the survey and some of the key findings of the fourth biennial Aon Global Risk Management Survey with more than 1,400 companies of all sizes, both public and private, from a broad section of geographies and industries, responding.
How have results changed compared to prior surveys?
This was the first year that political risk/uncertainties entered the list of the top 10 risks, coming in at No. 10 and projected to be No. 6 in three years.
This indicates that companies, regardless of size, are becoming more global and are now exposed to things like physical damage to assets from political violence or, even worse, the kidnaping of employees. As global expansion continues, companies need to continually address their political and security risks.
A rather disturbing trend in the survey is that loss of income from the top 10 risks has increased from 28 percent in 2011 to 42 percent in 2013, yet organizations reported a decrease in readiness from 66 percent to 59 percent over that same time period. In addition, respondents who say they have tracked and managed all components of their total cost of risk have dropped from 39 to 33 percent.
What is the No. 1 business risk and why?
The No. 1 risk cited has been the same for the last three surveys and projected to remain the No. 1 risk three years from now — economic slowdown/slow recovery.
With issues like the continuing weakness in the eurozone, slowing growth forecasts in India and China, the continued uncertainties related to U.S. fiscal policy and elevated unemployment worldwide, it is no wonder that this continues to be the No. 1 concern.
Many organizations are only now starting to scratch the surface in terms of their understanding of the impact events in other parts of the world can have on them, even if they do not have global operations. Organizations need to look beyond daily operations and take a more holistic approach to examining risk in order to remain flexible and adapt to issues that can have a detrimental effect on the bottom line if not properly managed.
What else did the survey reveal?
The survey also revealed some interesting differences by region of the world. For example, computer crimes/hacking/viruses/malicious code is the eighth-rated risk by respondents in North America. However, in other parts of the world this was rated much lower — Asia Pacific, 37th; Europe, 19th; Latin America, 35th; and the Middle East and Africa, 19th.
These types of attacks are becoming common in the U.S., with new reports almost weekly about data security breaches, so this is already high on U.S. companies’ radar screens. Now that we are seeing more worldwide breaches, such as the cyberattack on the European Commission, the ranking of this risk in other regions of the world should increase in future surveys.
By identifying their top risks, as well as comparing peer companies by industry, region and organizational size, companies can be off to a great start in terms of better understanding their own organizations — and knowing how to respond when these risks come up.
Kevin Pastoor is managing director at Aon Risk Solutions. Reach him at (248) 936-5346 or [email protected].
Insights Risk Management is brought to you by Aon Risk Services
