Awareness versus action – the big divide
The 2019 survey is informed by the largest number of respondents to ever participate in the survey. We received responses from more than 2,600 risk decision makers from 33 industries, representing small, medium and large-sized organisations operating in 60 countries.
The research has demonstrated once again that risk management must evolve at an enterprise-wide, rather than siloed, approach and function. Only by embedding a true risk culture from the shop floor to the boardroom, will Australian businesses manage their risk appropriately.
However, despite apparent improvements in awareness levels, especially amongst C-suite leaders, there remains a clear gap between what organisations say they need to do and what actions they are actually taking.
Top-of-mind concerns for Australian organisations include a slowing economy, damage to reputation and brand and business interruption.
Following are some of the key Australian insights from the survey.
Political instability in Australia is the “new normal”
In 2017, Australian respondents ranked regulatory and legislative change as the top risk facing local business, something which perhaps reflected the level of change evident at the time in governments at state and federal level. Two years later and despite an upcoming Federal election, this risk has receded as a concern to local business, a change which may reflect business leaders have adapted and accepted accelerated rates of change in political leadership as the new norm.
Brand and reputation – the ultimate risk factor
According to the 2019 survey, the number one risk facing Australian business is damage to brand and reputation.
Australian businesses recognise that reputational crises can have a substantial impact on a company’s future.
Whether it is the threat of cyber-attacks or a major project failure, the prevalence of social media and the 24/7 news cycle has the potential to create rapid contagion and this can have an immediate and lasting impact on an organisation’s shareholder value and reputation.
While in the past brand and reputation was considered intangible and uninsurable – there is an emerging suite of products and solutions available to businesses to prepare for and mitigate this category of risk. Businesses should explore these solutions now to prepare for the unexpected.
Economic slowdown has emerged as the second highest risk facing Australian organisations and the top risk globally.
Australia was largely isolated from the impacts of the Global Financial Crisis, and it has been more than a quarter of a century since the last Australian recession. However, fears for the domestic economy, fuelled by the decline in the property market and electoral uncertainty, have pushed this risk up six places since the 2017 survey. Australian C-suite executives are concerned about how they will manage potential cuts in capital spending while continuing to invest in innovation to remain competitive in a stalled economy.
Business interruption is of rising concern to both Australian and global businesses, with a marked rise in its significance over the last two years. Moreover, the hazard extends well beyond the confines of conventional insurance responses. The underlying complexity of regional and global supply chains exacerbate exposure to businesses and this, in turn, is reflected in an increased incidence of loss, both insured and uninsured.
As organisations rely more and more on digital technology to improve operational efficiency and manage their supply chains, they are becoming more vulnerable to cyber attacks, which have emerged as a major cause of business interruptions. Cyber-attacks not only have an immediate impact on a business’s ability to function, but the costs implications are immense. According to the Ponemon Institute, the global average cost of a data breach in 2018 is up 6.4 percent over the previous year to $3.86 million.
Apart from man-made disruptions, natural disasters also inflict substantial damages. In Australia, it’s easy to understand how headlines addressing devastating drought, bushfires, hailstorms, cyclones and floods translate into concerns about revenue stream resilience but we see the same elsewhere around the world, with business interruption moving from number 8 globally in 2017 to number 4 in 2019.
Accelerated rates of change in market factors
Accelerated rates of change in market factors has risen globally and locally; entering Australia’s top 10 for the first time, and it leaps globally from number 38 in 2017 to number 3 in 2019, is even more remarkable.
The re-emergence of protectionist international trade policies, growing geopolitical tension, financial market volatility and rapid technological advancement have put Australian business leaders on alert in an environment where they are already witnessing slowed economic growth, a weaker Australian dollar and the fallout from the Hayne Royal Commission.
Failure to attract or retain top talent
Failure to attract or retain top talent remains a top ten concern for Australian business, at number 7 [unchanged on 2017] but has slipped out of the top 10, to 11, globally for the first time. As an isolated geography with a limited talent pool, Australian businesses are finding themselves operating in a difficult environment, with recent changes to sponsored employment visas limiting organisations’ ability to source top talent from overseas. It therefore comes as no surprise that this risk issue should rank higher in the consciousness of Australian business leaders.
What does the future hold?
Participants across all regions agree that reputation/brand and economic slowdown/slow recovery, the top priorities this year. Overall about one third of the risks on the Global Top 15 List are new or re-entries to the top tier.
Findings from Aon’s 2019 survey provide strong evidence that the ongoing dynamic macro-economic environment will continue to impact business models and key risk concerns for organisations for the next few years.
The three-year forecast suggests that the risk list for Australian business will be largely consistent in 2022. With volatile global economic conditions and fast changes in today’s digital and sharing economy, the top risks, many of which are either non-insurable or only partially insurable, are becoming increasingly unpredictable to prepare for and mitigate. This does not look to change anytime soon.
How Aon can help
As leaders in risk management and insurance broking, Aon believes in the power of data and analytics, combined with expert insights, to provide clients with innovative solutions that help them manage volatility, reduce risk and realise opportunity.
Businesses need to make sure they are prepared and covered for potential risks. The 2019 Global Risk Management Survey encourages organisations of all sizes to evaluate their current risk strategy and ensure that it is appropriate for their business.
For help with developing and refining your businesses’ risk management and risk financing strategies, please contact Aon today.
Aon surveys thousands of risk managers across 60 countries and 33 industries every two years to identify key risks and challenges their organisations are facing.
Participant profiles in Aon’s 2019 Global Risk Management Survey encompassed small (below $1B USD), medium ($1B – $15B USD) and large (above $15B) organisations, including respondents from privately-owned companies, public organisations, government and not-for-profit entities.
The full report can be accessed at www.aon.com/2019GlobalRisk.
Click the download button to view a summary of the Australian highlights.