Brand and image, the state of the economy and the impact of regulatory change are the three top risk concerns for Australian and New Zealand organisations in 2012/13.
These are the findings from Aon’s 11th annual Australasian Risk Survey, which provides a snapshot of the risk management practices of 133 businesses in 19 industries across Australia and New Zealand. The report provides a unique view of the key concerns of some of Australia and New Zealand’s largest and best known organisations – and offers some insights into upcoming business trends.
“What we look for in the survey responses are year-on-year changes that help us understand how business is faring, how it is seeing and responding to a rapidly changing environment and in turn, the kind of help organisations need to better manage their risks,” said Jason Disborough, Managing Director, Global, of Aon Risk Solutions.
The 2013 survey reveals that risk posed by the market environment (economic slowdown), while generally ranked between five and 10, has made its way up seven places in recent years to take equal first place with another risk constant: brand and image.
“This would suggest that despite relatively strong local performance, organisations now see the economy as a greater risk than they did during the GFC and its immediate aftermath,” he said.
“It’s likely that the sheer persistence of the sovereign debt crisis in Europe, slower than expected economic growth in China and India and uncertainty surrounding US fiscal policy is taking its toll. Underpinning this may well be concerns about our economy’s reliance on natural resources and the risk of lessening demand from emerging markets.”
Ranking at equal first position was risk to brand and image, with more than half (56%) of organisations surveyed saying that risk to brand and image had resulted in loss of income in the past 12 months. Technological innovation, the rise of social media and a number of recent well publicised brand scandals suggest that this risk is unlikely to lessen any time soon.
Hard on the heels of the number one ranking – and potentially contributing to them – is risk relating to regulatory and legislative change. While ranked third overall, it is the number one concern for the banking and finance industry, the healthcare industry and not-for-profits.
“The concern surrounding regulatory change may be based to a large extent on continued political uncertainty with an election on the horizon, along with new legislation such as the Carbon Tax, the Mining and Mineral Resources Rent Tax and the harmonisation of the Occupational Health & Safety (OH&S) laws,” said Mr Disborough.
He also noted that despite the extensive media coverage, the reality is that these changes have, as yet, failed to materially impact the bottom line of most companies surveyed.
A steep rise in concern about business interruption sees it moving up two places to be ranked fourth, which can be attributed to natural disasters both in Australia and New Zealand, notably the Christchurch earthquakes and fires and floods in various Australian states.
“The effects of these disasters have been felt by many businesses, especially in terms of customer impact and there is a real understanding now that there is absolutely no room for apathy about business interruption risk – particularly in relation to supplier management,” said Mr Disborough.
On the human resources front, the survey found that a failure to attract and retain top talent ranked as number five, as it did last year. The skills shortages in many industries combined with cost reductions, significant restructuring and major organisational change, demonstrates that employers recognise the real challenges involved in building and maintaining a team that can effectively further the organisation’s business goals.
In addition to ranking the top five risks, the survey reveals a great deal about businesses’ sense of their operating environment in general. This year, for example, lack of innovation and increased competition made their way into the top 10 for the first time, while political risk and uncertainty was a first-time entrant into the top 20, as was lack of technology infrastructure to support business needs at 14, and failure to implement and/or communicate strategy at 19.
“The survey is an invaluable tool for companies seeking to improve risk management practices by enabling them to compare and contrast their own strategies, costs and management structures with those of their peers,” said Mr Disborough.
“Benchmarking organisational practices against the best in the industry offers a prime basis for improvement.”
