Risks to global businesses become more volatile and complex: Aon
Unprecedented volatility in economics, demographics and geopolitics and 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.
Damage to reputation/brand remains 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.
Another major concern is political risk/uncertainties. According to Aon, trade protectionism is on the rise while terrorism and political violence ratings are highest since 2013. Even developed nations that were traditionally associated with political stability are becoming new sources of volatility and uncertainty.
Meanwhile, cyber concerns continue to be significant for companies as they can trigger costly business interruptions. The report says that cyber crime 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.
The report also identifies disruptive technologies/innovation as an emerging risk, which it predicts to be one of the top risks by 2020. "With the recent introduction and adoption of new technologies, such as drones, driverless cars and advanced robotics, businesses have an increased awareness of the impact of innovation," it said.
Economic slowdown, increasing competition, regulatory/legislative changes, failure to attract or retain talent due to change in immigration policies in North America and Europe, business interruptions, and third party liability (including errors and omissions) are among the other risks highlighted in the report.
According to the survey, risk preparedness is at its lowest level since the survey’s inception in 2007.
Rory Moloney, chief executive officer for Aon Global Risk Consulting, said: "We are living in a challenging new reality for companies of all sizes around the world. There are many emerging influences that are creating opportunity, but at the same time, creating risks that need to be managed."
"As the risk landscape for commerce evolves, businesses can no longer rely solely on traditional risk mitigation or risk transfer tactics. They must take a cross-functional approach to risk management and explore different ways to cope with these new complexities," Moloney added.
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