The last two years 2020 and 2021 and the instability caused by the COVID-19 pandemic, social unrest and the impact of climate change have highlighted how risks facing businesses are becoming increasingly volatile and interconnected according to Aon’s 2021 Global Risk Management Survey.
In 2021, beyond the pandemic, businesses also had to contend with growing cyber threats, business interruptions and supply chain disruptions. All of these ranked among the top 10 risks in the survey.
The survey findings say that to thrive, businesses must take risks. At the same time, they must prepare to address the impacts of new and increased sources of volatility. To build the sorts of resilience necessary to face future crises, organisations must recognise the interconnected nature of many exposures and approach risk management in a holistic manner to mitigate their exposures. They also need more and better data, and the analytical capability to derive actionable intelligence from that information.
Aon commercial risk solutions CEO Lambros Lambrou said of particular concern in 2022 are six ‘long-tail risks’. These are cyber security, damage to brand and reputation, complex supply chain risk, pandemic, intellectual property and climate transition.
Mr Lambrou said, “Companies tend to understand these risks less well, either because they are new or because they are accelerating or changing in profile. This requires companies to take a fresh look at risk assessment and scenario quantification, and to rigorously test the validity of existing risk management and financing programmes.”
The number and variety of risks that a modern business must face are increasing year-on-year. In this more volatile world, cyber risks have increased as businesses rely more on technology. Meanwhile, many businesses have also become reliant on far-flung supply chains, which were weakened by pandemic shutdowns. The impact of climate change has not only hit an organisation’s operations, but it has also forced changes to business models and markets, new competition and possible reputation and environmental, social and governance (ESG)-related risks. A