When Disruption meets Opportunity
Navigating new forms of volatility
As we continue to grapple with the impact of the ongoing global health crisis, businesses in APAC are gearing up for what’s next. The region is already experiencing a volatile geopolitical landscape and differing post-pandemic recovery measures. Now, leaders are having to seek new and innovative solutions to navigate further unprecedented realities to come and the emerging opportunities in their wake.
Interruption or opportunity?
Amid the growing interconnectedness of our world, business interruption tops the current list of risks in APAC. According to our 2021 Global Risk Management Survey, this risk is set against the backdrop of many moving parts.
For instance, the technology sector in China is facing regulatory changes. Also, global supply chain disruptions due to COVID-19 mean more international companies are poised to move manufacturing closer to their own markets, prompting a downturn in Asian production. However, this will likely be just a small bump in the road as confidence returns in the region and restores it back to key hub status.
Banks in APAC generally appear to have the most mature approach to risk management, followed by the oil and gas, manufacturing, and pharmaceutical industries in which safety is deemed paramount. Still, challenges such as workforce shortage as well as the failure to attract and retain talent will have a major impact on businesses and their ability to thrive in the endemic. The increase in competition and hiring costs ultimately translates to higher prices for customers, particularly in countries that rely heavily on imported labour, such as Singapore.
Operating under the ‘new better’
“The last two years have highlighted the perils of complacency,” says Owen Belman, Aon’s Head of Asia, while stressing the need for businesses in APAC to focus on future-proofing their operations as vaccination rates improve and travel corridors open. He believes that a dynamic and resilient risk management approach is essential for dealing with future unpredictabilities.
According to Belman, business interruption today is systemic in nature, partly due to new technology and supply chain integration. “Rather than see it as a linear event, it is important for business leaders to shift their risk assessments from event-based to impact-based ones in the face of rapidly occurring changes,” he explains. “This, in turn, creates opportunities for them to differentiate themselves in the market.”
Belman also cites the work Aon has been doing in the cat bond space as one of the ways with which Aon is helping clients and partners identify and capture these opportunities. In helping an increasing number of Asian businesses explore and adopt captives and protected cell companies (PCCs), Aon currently offers a worldwide presence in captive domiciles – with Singapore being one of them.
Prioritising the power of people
Business interruption is fundamentally evolving, with losses no longer being limited to physical events but significantly driven by ethical, social, and reputational considerations – or ESG. To attract and retain talent, employee well-being and resilient leadership have become pivotal. By providing more meaningful and comprehensive support for their people, businesses can capitalise on the ‘new better’ by minimising exposure to other risks that may interrupt operations.
“As we learned from our recent well-being survey, companies that doubled down on their well-being initiatives have proven to be more resilient,” surmises Jane Drummond, Aon’s Chief Commercial Officer for APAC. She advocates for a holistic approach encompassing the physical, mental, social, financial and career dimensions. “Insurers will then be able to engage in successful interventions that positively impact the future workforce,” she explains. “This will have critical knock-on effects for other risks.”
Drummond also expects more businesses to change their focus from reacting and responding to building agility, as well as rethinking the entire employee proposition in Asia. “By looking at the transformation spectrum, they can then seize opportunities to gain quick wins by leveraging megatrends like the talent war and ‘Great Resignation’ to push for change and create value,” she explains.
The future of business in APAC
While capital investments and APAC’s future growth potential are tightly linked to questions about long-term economic recovery from the COVID-19 crisis and the full resumption of business activity, the ongoing digital revolution will play a big role in helping the region bounce back. For example, Southeast Asia’s digital economy
is set to expand by up to 30%, reaching $222 billion in 2022. An emerging $800 billion opportunity in the metaverse market has also been identified, with Tencent, Hybe and ByteDance in China as drivers.
Alongside these opportunities lie underrated risks such as climate change and other long-tail risks. By fully understanding and mapping their risks against opportunities, companies can establish their appetite and tolerance to balance growth and protection. This applies to physical assets as well as intangible assets such as human capital, as talent-related issues are a big part and parcel of business interruption.
Collaborating with the right insurance partner will allow businesses in APAC to maximise their potential and stay ahead of the curve. Strong partnerships will undoubtedly help leaders refresh and reinforce their risk management approach, look beyond traditional risk solutions and move forward with confidence and certainty.