Published on the 06/06/2019 | Written by Heather Wright
Interconnectedness of risks presenting challenges…
Reputational and brand damage, the economic slowdown and business interruption are top of mind when it comes to concerns for Australian business leaders, with the growing interconnectivity of risks presenting challenges for business.
That’s according to insurance company AON’s latest biennial Global Risk Management survey, which says Australian companies must embed ‘a true risk culture’ from the shop floor to the boardroom to manage risk, and ensure risk management is enterprise wide, rather than continuing a siloed approach.
Globally the economic slowdown was the biggest concern, followed by damage to reputation/brand and accelerated rates of change in market factors.
Bruce Gordon, AON managing director, global and corporate, says the last survey, in 2017, saw Australian respondents ranking regulatory and legislative change as the top risk facing local business.
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.
“Two years later and despite an upcoming Federal election [at the time the survey was taken], 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,” Gordon says.
Brand and reputation remain the ultimate risk factor, Aon says.
“Whether it is the threat of cyberattacks 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,” Gordon says.
Despite it being more than a quarter of a century since Australia’s last recession, economic slowdown has emerged as the second biggest concern locally – and the biggest concern globally.
“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,” Gordon says. “Australian c-suite executives are concerned about how they will manage potential cuts in capital spending while continuing to invest in innovation to remain competitive in a stalled economy.”
Business interruption has also seen a significant rise since the last survey, with Aon noting the complexity of regional and global supply chains exacerbates exposure to businesses.
“As organisations rely more and more on digital technology to improve operational efficiency and manage their supply chains, they are becoming more vulnerable to cyberattacks, which have emerged as a major cause of business interruptions.”
Increasing competition, cyberattacks and data breach, cash flow and liquidity risks, failure to attract or retain top talent, failure to innovate and meet customer needs and regulatory and legislative changes took fourth to ninth place, respectively.
The accelerated rate of change slipped into Australia’s top 10 for the first time, taking tenth place as protectionist international trade policies, growing geopolitical tension, financial market volatility and rapid technological changes put Australian business leaders on alert.
Aon says the three-year forecast suggests Australia’s risk list will remain ‘largely consistent’ in 2022.
