M&A legal scrutiny hardest-to-manage aviation risk

The most severe and hardest-to-manage risk expressed across the wider aviation industry is the legal scrutiny associated with mergers and acquisitions (M&A), according to Mark Williams, chief executive officer (CEO) of International for Willis Towers Watson’s aerospace division and global head of transportation, writing in a blog.

Williams was taking the information from this year’s Willis Towers Watson Transportation Risk Index.

The ‘failure of critical IT systems’ and an ‘over-dependence on national infrastructure’ are the second and third most significant risks, respectively, according to the preliminary findings. The ‘impact of natural disasters, epidemics or armed conflict’ and ‘changes in seasonal demand’ rounded out the top five risks overall.

From a ratings perspective, aviation executives saw little quantitative difference between their top five stated risks, effectively suggesting a business environment where primary risks (those that are both highly disruptive and hard to manage) are congregating, according to the Williams, in a blog post for the broker.

There were regional differences in perceived risks, according to the data. In Europe, Russia and Central Asia, the three highest-ranked perceived risks were: an over-dependence on national infrastructure; the potential failure of IT systems; and over-dependence on third-party suppliers

In North America, industry leaders appear to be more openly concerned by changes in seasonal demand, as well as the regulatory threat posed by competition or anti-trust law infringements.

In Latin America as well as Asia and Australasia, the top perceived threat was social unrest, involuntary migration and terrorism (this ranked markedly higher in Latin America than in Asia and Australasia).

The same issue also appears in the top five risks in the Middle East and Africa, where it is joined by fears of failing IT systems and protectionist policies and regulations that restrict open competition.

Williams said that the aviation industry is at an inflection point, with regulation and technological advancements demanding new operating models whilst, simultaneously, the industry also faces the growing problem of both physical and digital attacks from hostile actors targeting the sector’s strategic position in the movement of people, goods and commerce.

“This is all set against an unstable geopolitical and economic backdrop, and an ultra-competitive global labour market,” he said.