Business leaders reveal most pressing risk management concerns

Some risks largely underestimated, report warns

Business leaders reveal most pressing risk management concerns

Insurance News

By Ryan Smith

Aon has announced the results of its 2023 Global Risk Management Survey, which polled nearly 3,000 risk managers, C-suite leaders and other executives across 61 countries and territories.

The survey asked risk management decision-makers to identify their most pressing business challenges, Aon said.

“The world is more volatile, reflecting a series of profound transitions across trade, technology, weather and workforce issues that have awoken business leaders to the interconnected nature of risk and people challenges,” said Greg Case, CEO of Aon. “Through the use of advanced analytics and more integrated risk capital and human capital capabilities, we’re helping clients quantify, manage and match capital to the risks they recognize today as we innovate on their behalf to serve their future needs.”

The biennial report found that human capital issues have become a key business risk, driven by rising healthcare costs, competition for talent, workforce shortages, and a lack of retirement preparedness. In this year’s survey, “attracting and retaining top talent” ranked as the fourth-highest concern globally, after failing to crack the top 10 in 2021.

Despite this, only 11% of survey respondents said they had quantified their people risks, which Aon said indicated “a significant gap” between awareness of the risk and preparedness.

“We are at a pivotal moment in time, when business leaders are recognizing the true cost of human capital challenges and the reality that people risk intensifies all other top business risks,” said Lambros Lambrou, CEO of Human Capital at Aon. “Shortfalls in talent, workforce, or critical, specialized skills can hamper innovation and competitiveness and increase exposure to cyber attacks, regulatory breaches, supply chain issues, business interruption and reputational damage.”

Climate, AI risks underestimated

Missing from the top 10 concerns were climate, which came in at number 17, and artificial intelligence, which only hit number 49. Aon said these showings suggest a lack of awareness about the potential impact of these issues.

“More immediate climate driven risks include property damage, impact of severe weather, natural catastrophes, and the consequences for business of climate-related regulatory changes and compliance obligations,” Aon said.

Andy Marcell, CEO of risk capital and CEO of Reinsurance Solutions at Aon, called the relative lack of concern about climate “confounding.”

“Climate is not an emerging risk, but an urgent one, with increasingly monumental implications for businesses of all sizes,” Marcell said. “What leaders need now are insights from advanced analytics and modeling alongside innovative parametric solutions that will help them make better decisions today and protect them in the future.”

AI is another seemingly underrated risk, as it has the potential to introduce new risks for many companies and change the severity of many existing risks, Aon said.

“For example, far-reaching AI programs could increase cybersecurity exposure, engender legal issues and amplify human capital risks such as scarcity of in-demand skills sets,” Aon said. “Risk managers who understand the liabilities and insurance implications of AI across their digital value chain add value to their enterprise AI strategy.”

Supply chain risks

Business leaders ranked the risk of supply chain and distribution failure as their sixth-largest risk, the category’s highest showing in 14 years. According to the report, less than 40% of organizations have conducted supplier resiliency assessments, and less than 20% have diversified their supplier base in order to mitigate supply chain risk.

Cyber attacks

Cyber attacks and data breaches remained the top-rated risk in the survey, both in North America and across the globe.

The category has also risen to the top spot in Europe and Asia-Pacific. Business interruption remained the number-two risk in the report, Aon said.

Top risks

According to the survey, the top 10 global risks are:

  1. Cyber attacks/data breach
  2. Business interruption
  3. Economic slowdown/slow recovery
  4. Failure to attract or retain top talent
  5. regulatory/legislative changes
  6. Supply chain or distribution failure
  7. Commodity price risk/scarcity of materials
  8. Damage to reputation/brand
  9. Failure to innovate/meet consumer needs
  10. Increasing competition

Interestingly, only two of the top five risks identified by business leaders are insurable – and half of the top 10 are currently uninsurable.

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