A Changing Risk Landscape
- Most clients are still in the recovery phase and are not concentrating on reshaping yet
- Key priority for clients is to protect people and assets – this is consistent across sector, size and region
- Existing risk management infrastructures struggled to cope in the initial response
Two years ago, risk readiness in the business community had declined rapidly, reaching an all-time low in 12 years. An economic slowdown, business interruption, rapidly changing market forces, and failure to innovate were among the top 10 risks companies feared—while a pandemic or health crisis was at the very bottom of the list, according to our 2019 Global Risk Management survey.
Companies, governments, industries, and communities entered 2020 already concerned about the impact of a changing regulatory environment, geopolitical forces, cyber attacks, large-scale disruption, and then suddenly with COVID-19 nearly all of those risks converged at once.
Aon has released a global report, Reprioritizing Risk and Resilience For a Post-COVID-19 Future, finding that COVID-19 has shown that it will be imperative for businesses to reprioritise risk and to innovate and explore new risk management strategies.
Aon’s global report found that prior to COVID-19 82 per cent of respondents said a pandemic or other major health crisis was not a top 10 risk on their organisation’s risk register. At the time of Aon’s Global Risk Management Survey in 2019, pandemic risk was ranked 60 out of 69 identified risks. Enterprise risk management strategies and management teams were therefore unable to rapidly respond to the threat of the pandemic and, when it hit, their risk infrastructure struggled to cope with the initial response.
In Australia, existing and emerging long-tail risks will continue to challenge organisations across all industries, and the pandemic, its economic devastation and a hardening insurance market are pushing organisations to build a new enterprise risk management strategy.
The report further identified differences in how businesses have responded regionally; prior to COVID-19, 52 per cent of respondents in Asia Pacific had a pandemic plan in place, compared with approximately 30 per cent in the rest of the world.
“There is no question that the COVID-19 pandemic will change the way companies operate forever. Our research shows that protecting people and assets emerged as a top concern, with many companies focused on well-being, operational resilience and the retention of key people. There is also a clear need to build a more integrated, agile and enterprise-wide risk program, as companies are likely to find gaps in their strategy and in the market. Equally important is that the insurance industry innovates in response to companies’ changing needs, increasing global volatility and emerging risks. Successful insurance solutions in the wake of the pandemic will be more agile, strategic, targeted and scalable.” – Jennifer Richards, Managing Director – Specialties at Aon in Australia.
Going forward, risk and business leaders must reprioritise risk—broadening their perspective and evaluating major shocks, not just anticipated losses, and elevating risk managers to an enterprise-level strategic role. By doing so, they will also be able to redefine resilience. Together, these are the post-COVID imperatives required to reshape businesses into a more future-ready posture.