Top Risks Facing Organizations in Europe

Regional Results

03 of 06

This insight is part 03 of 06 in this Collection.

November 21, 2023 18 mins

Top Risks Facing Organizations in Europe

Top Risks Facing Organizations in Europe Hero Banner

European respondents to our Global Risk Management Survey (GRMS) ranked cyber attack or data breach as the number one current and future risk for the region.

Current Risks

Amid the conflict in Ukraine and continued recovery from the COVID-19 pandemic, organizations in Europe are having to deal with an increasingly volatile environment. While reported risk readiness among this year’s European survey respondents is 59 percent, the highest it has been since 2019, the volatile nature of doing business in the current circumstances adds additional complexity for Europe’s risk landscape.

Top 10 Current Risks: Europe
  1. Cyber Attack or Data Breach
  2. Commodity Price Risk or Scarcity of Materials
  3. Business Interruption
  4. Economic Slowdown or Slow Recovery
  5. Failure to Attract or Retain Top Talent
  6. Regulatory or Legislative Changes
  7. Supply Chain or Distribution Failure
  8. Damage to Brand or Reputation
  9. Failure to Innovate or Meet Customer Needs
  10. Workforce Shortage

The top-ranked current risk among European survey participants is cyber attacks or data breaches. While cyber attack or data breach is also the top risk globally, European organizations have particular reason to be wary of cyber threats. Cyber attacks on European countries have risen significantly since 2022, largely as a result of the conflict in Ukraine.1 Given that the spike in cyber attacks is relatively recent, the lack of data surrounding this risk makes building resilience a particular challenge.

Cyber attacks are not the only consequence of geopolitical volatility on European organizations: commodity price risk or scarcity of materials, ranked at number two, and business interruption, ranked number three, are both risks that have been greatly exacerbated by the conflict in Ukraine. Supply chain issues exemplify why such risks have become major concerns. While supply chain or distribution failure was ranked seventh among top 10 current risks, falling from number five in 2021, the conflict heightened the already substantial stress on supply chains from the COVID-19 pandemic.2 This has created a ripple effect on various business operations and related risks.

Failure to attract or retain top talent (ranked number five) coupled with workforce shortage (ranked number 10) illustrate the economic whiplash European businesses experienced in the wake of a post-pandemic hiring frenzy. Many companies are contending with talent shortages, especially when trying to fill specialized roles relating to cyber security and climate-related efforts. As organizations’ priorities switch between growth and costs, recruiting and retaining top talent remains a challenge and source of uncertainty. Challenges to attract and retain talent dovetail with number six–ranked regulatory or legislative changes, reflecting impending regulations relating to pay transparency. The EU Pay Transparency Directive,3 adopted in April 2023, establishes new rules around disclosing pay ranges that create new compliance and reputational risk concerns for European companies.

Taken as a whole, the top 10 risks for European organizations can be seen as a reflection of a complex and volatile threat landscape. No one risk can or should be considered in isolation; economic, political and environmental factors intertwine to create evolving and dynamic risk exposures. As a result, adequate preparedness entails comprehensive and holistic risk-mitigation strategies.

Underrated Risks

While many businesses throughout Europe are engaged in actions to support environmental and sustainability goals and requirements, climate change is absent from the list of current top 10 risks. This is surprising, considering the region has recently faced several extreme weather events, including severe flooding4 and wildfires, that were exacerbated by climate change.5 Additionally, new regulations such as the European Climate Law (which outlines the European Green Deal for the 27-country European Union (EU) to become climate-neutral by 2050, which came into force in 2021) and the Corporate Sustainability Reporting Directive (which came into force in January 2023) require a broader set of companies to report on sustainability. The new rules will have to be applied for the first time in the 2024 financial year, for reports published in 2025.

In view of these requirements—combined with the very tangible impact of climate change on the region’s agricultural production and hospitality industry—future losses are likely to mean more volatility, costs and even reputational impact. Therefore, climate change and the associated climate transition risk should be on the forefront of many companies across the region. Concerns around climate change can be connected to the number eight–ranked current risk, damage to brand or reputation, because companies viewed as lagging behind competitors in their transition to sustainable models or, alternately, those accused of “greenwashing” can suffer considerable reputational consequences.6

Furthermore, geopolitical volatility, also absent from the top 10 current risk list, is another underrated risk that can negatively affect businesses. The volatility surrounding the conflicts in Ukraine and Israel have tremendous repercussions for businesses in terms of risks to operations, workforces and growth but also in terms of how they affect the strategic and financial priorities and sentiments of business stakeholders, consumers and legislators.

Losses and preparedness

Just over a third of respondents suffered a loss due to the risks in the top ten, while 59 percent have plans in place to respond to them.

  • 34%

    average percentage of respondents who indicated risks in the top ten contributed to a loss for their organization in the 12 months prior to the survey.

    Source: Aon's 2023 Global Risk Management Survey

  • 59%

    average percentage of respondents who stated their organizations have set up a plan to respond to risks in the top ten.

    Source: Aon's 2023 Global Risk Management Survey

Future Risks

Economic slowdown or slow recovery and failure to attract or retain top talent—ranked number three and four, respectively, among Europe’s future risks—both advanced one place compared with the current top 10 risks list. This, along with workforce shortage increasing in rank from number 10 in the top current risks list to eighth place in future risks, indicates a growing uncertainty about the state of the labor market and how well it can sustain more-complex and tech-enabled business models. There is a substantial supply and demand issue in the labor market, where need for talent, such as climate scientists and AI developers, far exceeds the supply of talented workers. This means that there is a massive premium on talented workers, and it raises questions about whether education systems and training programs can adapt quickly enough to address these growing concerns.

Top 10 Future Risks: Europe
  1. Cyber Attack or Data Breach
  2. Commodity Price Risk or Scarcity of Materials
  3. Economic Slowdown or Slow Recovery
  4. Failure to Attract or Retain Top Talent
  5. Regulatory or Legislative Changes
  6. Geopolitical Volatility
  7. Business Interruption
  8. Workforce Shortage
  9. Climate Change
  10. Failure to Innovate or Meet Customer Needs

The potential revenue impacts of workforce shortages limiting production and distribution have become an even more acute concern for respondents in Europe. According to Eurostat, more than three-quarters of EU companies already struggle to find workers with the necessary skills to fill jobs. As well as hampering economic growth, labor shortages in sectors vital to moving to a greener and more digital future could risk the success of the EU’s industrial strategy. Shortfalls in talent can hamper innovation and competitiveness and increase exposure to cyber attacks, regulatory breaches, supply chain issues, business interruption and reputational damage.

Geopolitical volatility rose to rank six after not breaking into the top 10 current risks. It shows a growing concern among risk leaders that the possible effects of geopolitical volatility will increase the risk to their organizations, limiting trading opportunities, posing threats to their workforce and affecting future growth. The protracted conflict in Ukraine and greater instability in Israel and the wider Middle East are undoubtedly among the reasons why companies in the region pushed geopolitical volatility into the future top 10 risks.

Climate change entered the future top 10 at rank 9 in Europe, which shows that while respondents see other risks as more immediate, they are concerned about the future impacts of this risk. Indeed, companies will soon be affected by the EU regulations mentioned above, together with the 2030 Climate Target Plan, in which the European Commission proposes to raise the EU’s ambition on reducing greenhouse gas emissions to at least 55 percent below 1990 levels by 2030. Organizations in the region would be well advised to create a climate risk register and, in the absence of “climate change insurance,” consider alternative risk transfer solutions such as green captives and parametric insurance as a means of building a data story and pre-loss funding for any losses that may happen over time.

How Can Organizations in Europe Mitigate These Risks Effectively?

Despite the high average risk readiness level in Europe compared with recent years, the region’s average readiness is lower than every other surveyed region, save for Latin America. To boost their risk readiness, European organizations should take a comprehensive approach to examining their risks, considering immediate potential impacts as well as what could influence other factors and risks. Viewing the risk landscape holistically allows for greater insight into the nature of various risks, as well as better-informed decision making. Understanding the interrelated nature of risks is critical to addressing and mitigating vulnerabilities. For example, failure to attract or retain top talent has a direct influence on how companies manage climate change and their cyber security.

The speed at which risks are evolving is likely to continue accelerating, placing even greater stresses on organizations. Taking a more proactive approach to managing risk and building resilience can help businesses in periods of uncertainty. While historical data may have been used to examine where future threats may lie, the rapidly changing and interconnected risk landscape highlights how those methods may no longer apply. Organizations should be open to exploring new options for identifying the skills, methods and budget necessary for managing risks.

Using weather systems data to predict loss likelihood as opposed to relying on historical loss information is an example of how alternative datasets can provide leading indicators, which will be more useful for risk types that are undergoing accelerated change.

A holistic approach is also key to people strategy. As ways of working continue to evolve rapidly, organizations need to constantly innovate at pace to remain competitive. Whether upskilling for the energy transition, training or staffing around AI applications or closing gaps in the workforce, organizations should focus on building talent pipelines to support current and future growth. And when it comes to supporting growth and innovation, a culture of robust diversity and inclusion is key: organizations with diverse and inclusive workplace cultures enjoy tremendous performance and financial benefits. One study showed that each 10 percent increase in gender diversity at a workplace increases earnings by 3.5 percent, and innovation revenues are 19 percent greater at companies with diverse management teams.7 The health, wellbeing and benefit program strategy implemented by an organization will play a key part in supporting diversity equity and inclusion (DEI) as well as broader environmental, social and governance objectives.

Employers should not rely solely on increasing compensation year over year to attract and retain top talent; rather, they should view their offer to employees in a holistic sense, with a clear strategy comprising total rewards, an employee value proposition, wellbeing, job architecture, upskilling and DEI. A successful people strategy can provide organizations with advantages in the intensifying competition for top talent and can differentiate employers of choice in the eyes of top performers.


1 European companies face data security challenges amidst rising cyberattacks, Fintech Global, September 2023
2 The Russia-Ukraine Conflict Will Have a Major and Long-Lasting Impact on Global Food Supply, Aon, April 2022
3 Pay transparency in the EU, Council of the European Union, May 2023
4 Climate change made floods in Western Europe more likely, World Meteorological Organization, August 2021
5 Spreading like Wildfire: The Rising Threat of Extraordinary Landscape Fires, UN Environment Programme, February 2022
6 What Is Greenwashing?, NRDC, February 2023
7 Diversity, equity, and inclusion in the workplace, Aon

General Disclaimer
This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent, or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss caused by reliance on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

Contact Us

Let’s Connect

Talk to Our Team

Contact our team today to learn more about how we can help your business.