For the first time since 2007, damage to brand and reputation has emerged as the top-ranked risk in Aon’s 2015 Global Risk Management Survey, while cyber risk has entered the top 10 for the first time this year.The connection between these two risks has been felt around the world in 2014, as a rash of data breaches demonstrated the fragile nature of consumer trust in leading corporations.
Aon Risk Solutions unveiled the key risks as identified by its clients across the globe in its 2015 Global Risk Management Survey.
For the first time ever cyber risk entered the top 10 at number nine, reinforcing its emergence as a key risk factor. Damage to brand and reputation was cited as the top overall concern facing global organisations, further underscoring the increasing importance of cyber risk as it has been regularly linked to brand and reputation issues in the wake of data breaches.
Aon’s global clients strongly felt that damage to brand and reputation ranked as a top concern across almost all regions and industries. This can be attributed to the growing challenges businesses are facing amongst the risks found in the top 10 list, such as cyber risk, but also including business interruption, property damage and failure to innovate.
The 1 400 survey respondents to the Aon Global Risk Management Survey included CEOs, CFOs and risk managers providing comparative insight into different perceptions of risk. Typically, financial and economic risks including commodity price risk, economic slowdown and technology failure were seen as damaging at C-suite level with risk managers focused on liability-related risks such as cyber, property damage and third party liability.
Alicia Goosen, business unit head: financial services group at Aon South Africa, says: “The insights provided by this survey help us understand how risks are changing as the global environment evolves. It’s little surprise to see cyber-risk enter the top 10 at the same time we are seeing increasing concern about corporate reputation as the two issues are a great example of the interconnectivity of risk.
What is surprising was the lack of alignment between the board and the risk manager.
“Such diverse views illustrate how imperative it is that the board of directors has effective and regular communication with risk managers to effectively assess and mitigate the company’s risk exposure.”
The top 10 risks identified are:
* Damage to reputation/brand;
* Economic slowdown/slow recovery;
* Regulatory/legislative changes;
* Increasing competition;
* Failure to attract or retain top talent;
* Failure to innovate/meet customer needs;
* Business interruption;
* Third party liability;
* Cyber risk (computer crime/hacking/ viruses/malicious codes); and
* Property damage.
Failure to innovate/meet customer needs remained at the sixth spot on Aon’s 2015 Global Risk Management Survey and is projected to rank at four in 2018. Respondents in the technology industry indicated that this is the most significant risk to their business. The threat severity of this risk tied to increasing competition, which is expected to top the list in three years, raises a red flag for the insurance industry.
Property damage also re-entered the top 10 global risk list for the first time since 2007, up from 17 in 2013. This risk was ranked highest by hotels and hospitality, non-aviation transportation and real estate. Unprecedented weather events in recent years have bundled this risk with the cause and effect of business interruption, which took the seventh spot on the 2015 list with reported losses down more than 10% from the 2013 survey.
“Aon’s 2015 Global Risk Management survey is one of the most comprehensive and insightful surveys available on risk mitigation and reveals a number of different challenges driven by today’s globally inter-dependent environment.
“While new risks such as cyber have moved to centre stage, established risks like damage to reputation or brand, are taking on new dimensions and complexities. The interconnected nature of these risks reinforces the importance of strategic risk management in every organisation,” Goosen adds.