The past two years have proved to be incredibly volatile, with the global COVID-19 pandemic having had a ripple effect across other types of risk, such as heightened awareness of reputation and cyber, as long-tail risks have become increasingly important to manage. With more emphasis and reliance on technology, cyber risk topped the list as the number one current and predicted future risk in Australia and globally, its highest rank since the inception of the survey. Ransomware exploded in 2020, and we have seen hundreds of Australian businesses of all sizes and in all industries impacted by extortion attempts of various levels of sophistication with ransoms ranging from the thousands to the millions.
The top 10 risks also strongly reflect the current landscape, namely COVID-19 and its impact on organisations. Amidst a backdrop of challenging market conditions, with Australia experiencing its first recession in 30 years, combined with unprecedented lockdowns and a closed border for much of 2021, this is testing the ability of firms to manage volatility and make better decisions. Organisations are shifting their focus from event-based to impact-based risk assessments: for example, business interruption was once seen as a linear risk, but the COVID-19 pandemic has demonstrated how it can affect multiple industries and companies simultaneously and globally.
In Aon's 2019 survey, Australian businesses rated damage to reputation and brand as their number one risk, and in 2021 it again featured high on the list at number two. While it has ranked consistently in the top five globally, it has remained in the top three in Australia for several years and remains in the top 5 predicted future risks. Australian businesses recognise that reputational crises can have a substantial impact on a company’s future.
While pandemic risk skyrocketed from 58 into the top 10 this year, it is somewhat surprising that it only came in at number 9 and does not appear in the top 5 predicted future risks. The COVID-19 pandemic has played out in multiple waves and interconnectivities that have combined to amplify its impacts. Pandemic risk has acted as a catalyst and magnifier of other risks on the top 10 list. A snap shift to remote working required many companies to accelerate their transformation to a ‘digital-at-scale’ model by two to five years, in turn magnifying related cyber, business interruption, supply chain risks and ability to meet customer needs. Industries and organisations that have been able to pivot and adapt quickly are more likely to remain resilient in the face of volatility now and in the future.
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