Risk readiness at a twelve-year low

Findings from Aon’s 2019 Global Risk Management Survey reveal that economic slowdown and volatile market conditions have led to the lowest levels of global risk readiness in 12 years.

Bruce Gordon, Managing Director for large clients at Aon Australia said, “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.”

In the place of regulatory and legislative change, top-of-mind concerns include a slowing economy, and business interruption although damage to brand and reputation, which has ranked consistently high at a local and global level over the last decade, tops the list of business leader concerns in Australia.

“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,” said Gordon.

Economic slowdown has emerged as the second highest risk facing Australian organisations and the top risk globally. “Despite it being more than a quarter of a century since the last Australian recession, 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.

“The public perception of harm may be an influencer on business beliefs, with concerns as to an economic slowdown acting as a lead rather than a lag indicator,” explained Gordon.

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.

He added, “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.”

A new entry to Australia top 10 risks is accelerated rates of change in market markets.

Gordon said, “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.”

Australian top risks

  1. Damage to reputation / brand
  2. Economic slowdown / slow recovery
  3. Business interruption
  4. Increasing competition
  5. Cyber attacks / data breach
  6. Cash flow / liquidity risk
  7. Failure to attract or retain top talent
  8. Failure to innovate / meet customer needs
  9. Regulatory / legislative changes
  10. Accelerated rates of change in market factors

Global top risks

  1. Economic slowdown / slow recovery
  2. Damage to reputation / brand
  3. Accelerated rates of change in market factors
  4. Business interruption
  5. Increasing competition
  6. Cyber attacks / data breach
  7. Commodity price risk
  8. Cash flow / liquidity risk
  9. Failure to innovate / meet customer needs
  10. Regulatory / legislative changes