Aon’s 2021 Global Risk Management Survey is designed to offer organisations the insights necessary to enable better management of risk related volatility and compete in an increasingly complex business environment. The 2021 findings from the survey underscore that companies are grappling with new risks and highlights the differences of opinion on how to best prioritise and respond to them.
Grant Foster, Managing Director CRH&A, Commercial Risk Solutions analyses the results specifically from the United Kingdom against the backdrop of the global results.
In a reflection of the global results, Cyber risk and Business Interruption risk take first and second place respectively for the UK in the risk ranking from the 2021 survey. With the digitalisation and interconnectivity of the global economy, Cyber Risk has become the top priority risk and a global threat. Business Interruption Risk, at number two also follows a worldwide trend, where the speed of communications and high expectations have met cost cutting, resulting in reduced resilience.
Below these first two places, UK risk prioritisation starts to differ considerably from the global view, with the UK’s economic backdrop – dealing with the COVID-19 pandemic, transitioning to a new trading relationship with the EU while forging new global trading arrangements – presenting unique challenges.
Naturally, companies with stronger brands and reputations are more likely to maintain sales and market share than their competitors, and the UK results highlight the importance of this, with Brand Risk rated the third most important overall.
In the midst of this market change, companies that fail to innovate are more likely to fail. Correspondingly Innovation Risk is ranked at number four, reflecting the risk associated with the innovations that are required in order to create new products and services, increase productivity, cut costs and differentiate companies from their competition.
Economic Slowdown is the fifth risk identified in the UK results. COVID-19 has already significantly affected the UK economy, bringing considerable uncertainty about the speed of recovery. Brexit has added another layer of uncertainty to the economic forecasts, with organisations unclear on the new levels of trade with Europe and emerging global markets.
At number six, Failure to Attract or Retain Talent Risk is a feature of the UK view of risk that is not shared globally. That’s because the UK economy had grown reliant on European workers across all levels of employment, from highly skilled workers to people on a minimum wage and the reduced freedom of movement has had a profound effect on companies’ ability to deliver growth.
Two emerging risks are Climate Change and Environmental, Social and Governance (ESG). The latter of which is being driven by changing investor behaviour, with funding availability being constricted for companies with a poor ESG track record. Modern day communications enable poor ESG practice to be quickly reported to large groups of activists, protestors and shareholders, which can have an immediate detrimental effect on an organisation.
Climate change presents risks in a number of areas. Companies have to overcome a number of transition risks as they decarbonise their operations while also possibly being hit by the effects of climate change. If the speed of transition is not fast enough, it will prompt further regulation and political decisions, which are likely to add significant challenges to how companies currently operate.
Looking to the future the top ten risks stay broadly the same for UK business, although there is a sense of returning to normality as pandemic and regulatory changes drop from the list. The new entrants to the list reflect the new dynamics of the economy, with the increasing importance of Corporate Social responsibility and ESG as green financing is becoming more prevalent, and also Increased Competition as firms adjust to new market norms in the new trading arrangements with the EU and the rest of the world.
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