Aon has released its biennial Global Risk Management Survey which reveals the top challenges facing Australian and global businesses.
Headline 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, impacting the C-suite’s ability to manage volatility and maximise performance.
Aon Australia large clients MD Bruce Gordon says, “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
Brand and reputation
“Whether it is the threat of cyber-attacks or 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.
The 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,” said 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.
“The underlying complexity of regional and global supply chains exacerbate exposure to business and this, in turn, is reflected in an increased incidence of loss, both insured and uninsured,” said Gordon.
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.”
Accelerated rates of change in market factors
A new entry to Australia top 10 risks is accelerated rates of change in market markets.
Gordon said, “The risk category did not feature in Australia’s top ten in 2017. The movement in the global ranking from number 38 in 2017 to number 3 in 2019, is even starker.
“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 seven, unchanged in 2017, but has receded in terms of deemed significance in the rest of the world.
Gordon concluded, “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.”