Japan Results
Aon's Global Risk Management Survey gathered input from almost 3,000 risk managers, C-suite leaders and other executives from 61 countries and territories to identify their most-pressing business challenges. Conducted every two years, the 2023 report is the ninth edition.
Top 10 Risks Facing Japanese Organisations Now
Japan Top 10 Risks
- Supply Chain or Distribution Failure
- Rapidly Changing Market Trends
- Cyber Attack or Data Breach
- Business Interruption
- Failure to Attract or Retain Top Talent
- Weather/Natural Disasters
- Economic Slowdown or Slow Recovery
- Geopolitical Volatility
- Environmental Social Governance (ESG)/Corporate Social Responsibility (CSR)
- Product Liability/Recall
Global Top 10 Risks
- Cyber Attack or Data Breach
- Business Interruption
- Economic Slowdown or Slow Recovery
- Failure to Attract or Retain Top Talent
- Regulatory or Legislative Changes
- Supply Chain or Distribution Failure
- Commodity Price Risk or Scarcity of Materials
- Damage to Brand or Reputation
- Failure to Innovate or Meet Customer Needs
- Increasing Competition
The number one risk ranked by Japanese business leaders in 2023 was Supply Chain or Distribution Failure, up from number ten in the 2021 survey. This is thought to largely be due to production delays caused by the semiconductor shortage, which is still fresh in the minds of Japanese organisations. In addition, geopolitical tensions that affect the supply chains of Japanese businesses are on the rise, and the "2024 problem" caused by the limitation of overtime hours for truck drivers (commencing in April 2024) may be reasons for recognising this risk as a top priority.
Rapidly Changing Market Trends is ranked as the number two risk (number one in the 2021 survey), followed by Cyber Attack or Data Breach at number three (number five in the 2021 survey). Rapidly Changing Market Trends continues to rank high, likely due to Japanese organisations viewing the increasing complexity of the global situation, technological innovations such as artificial intelligence, and accompanying digital regulations as unpredictable risks. Cyber Attack or Data Breach remains the number one risk globally, as awareness of cyber threats continues to increase. Cyber attacks are closely related to Supply Chain or Distribution Failure and Business Interruption (which ranked number four) and are expected to be risks that Japanese organisations will need to continue to navigate in the future.
Four of the top five risks in Japan are also among the top ten risks globally. However, the percentage of organisations in Japan that have developed plans to address three of those risks is lower than that of global companies. This delay in response also contributes to the large protection gap in Japan compared to Europe and the US. In particular, losses are derived from Supply Chain or Distribution Failure, Cyber Attack or Data Breach, and Weather/Natural Disasters, which are listed among the top 10 risks by Japanese organisations – it is necessary to consider how to respond to these business interruption causes.
Human capital emerges as a key business risk
Of particular note is Failure to Attract or Retain Top Talent, which was ranked number five in Japan. This risk is also ranked number four globally. In the 2021 survey, this risk did not rank in the top 10 in either Japan or globally, indicating a change in awareness and efforts toward human capital management over the past several years. With the borderless economy and digital transformation efforts to improve the employee experience and skills development, as well as rising wages due to inflation, how to recruit and retain the best talent is an unavoidable problem for organisations. The aging of skilled engineers in the manufacturing industry and professional personnel in the service industry are also thought to be contributing factors to the ranking.
Even if the decline in the workforce can be partially compensated for by streamlining operations through artificial intelligence and digitalisation, it is essential for companies to hire and retain talented people through proactive investment in human resources in order to remain competitive and achieve sustainable growth. Lack of human resources and specialised skills can stifle innovation and increase supply chain and business interruption risks. It is necessary to review the long-standing lifetime employment and seniority system in Japanese organisations to a more flexible personnel, compensation, and evaluation system that can treat talented people, as well as to consider benefit programs and wellbeing measures in terms of employment that accommodate diversifying lifestyles from the perspective of securing human resources.
