Risk managers unprepared for major risks, underestimating others

 Corporate risk managers are struggling to identify their major risks and are less prepared to manage them according to research from Aon Risk Solutions. Furthermore, many are underestimating the importance of current emerging risks.

The biannual survey produced by the risk consulting arm of insurance broker Aon identified and ranked the top 50 risks facing businesses. It showed that the number of firms that had a comprehensive plan or formal review of the top 10 of these risks had declined by 7 percent (to 59 percent from 66 percent) since 2011.

The lack of readiness comes despite an increased awareness of risk, evidenced by the fact that there was a 47 percent increase in the number of companies that took part in the survey (from 960 in 2011 to 1415 in 2013).

According to Stephen Cross, chairman of Aon Global Risk Consulting, this worrying trend could be a result of the economic slowdown and the lack of a recovery.

“This has strained organisations’ resources, thus hampering the abilities to mitigate many of these risks. Risk management departments have not got smaller but neither have they got any larger. Meanwhile the risks they face have become more challenging and more complex.”

The state of the global economy also has a strong correlation with the top ten risks. The economic slowdown is cited as the number one risk by the respondents, followed by regulatory changes and increased competition.

These three risks occupy the top three slots in the five main regions (Europe, North America, Middle East and Africa, Asia Pacific and Latin America) as well as for 24 of the 28 industries. The remaining top 10 risks are damage to reputation, failure to attract and retain top talent, failure to innovate, business interruption, commodity price risk, cash flow/liquidity risk and political risk.