Jason Disborough
Local economic conditions have trumped regulatory and legislative policies as the most prominent risk facing Australian businesses in 2014/2015, according to Aon’s most recent Australian Risk Survey.
Regulatory and legislative change, the top risk identified last year (2013/2014), still represents a key concern for business leaders across the region, ranking second in this year’s results. However, downbeat growth and inflation forecasts have elevated concerns of domestic economic slowdown as an obstacle to business growth and recovery.
The survey, now in its 13th year, spans a sample size of 579 C-Suite Executives and Risk Managers, is the most comprehensive to date, and provides meaningful risk management insights on 15 industry segments (with a detailed overview of six industry sectors, including energy, power, mining, health, construction and real estate).
Top 10 Risks to Australian Businesses:
- Local Economic Conditions
- Regulatory and Legislative change
- Brand and Image
- Increasing Competition
- Global Economic Conditions
- People Risk
- Human Resources
- Business Interruption and Supply Chain Risk
- Property Damage
- Corporate Governance
The survey draws a strong parallel to findings over the last two years, with 80 per cent of risk concerns centred on diminishing business confidence and political and regulatory uncertainty. As ‘brand and image’, ‘increasing competition’ and ‘global economic conditions’ round out the top five risk concerns, it is clear that an inability to grow underscores this year’s risk concern rankings.
“Local economic conditions have been on an upward trajectory through the top ten risks over the last number of years. However, its top position this year signifies a critical need for organisations to identify and confront local economic threats in order to achieve sustainable growth and better compete on a global scale,” said Jason Disborough, Managing Director – Global & Corporate, Aon Risk Solutions.
“While the current state of the market presents a very real challenge to Australian businesses, it also presents an opportunity for insurers to innovate around these soft risks, a provision currently deficient in the Australian market,” he added.
According to the report, Australian businesses currently maintain a good level of preparedness against risk. ‘People risk’ and ‘human resources,’ risk currently occupy positions six and seven in the top 10. This confirms the endurance of an industry-wide ‘war for talent’, renewing emphasis on the challenges of attracting and retaining a committed and knowledgeable talent pool as an organisational risk.
Of noticeable importance, business interruption and supply chain risk, as well as property damage and corporate governance mark new entrants in this year’s top 10 risks. These results indicate a greater need for organisations to invest in structures and procedures designed to protect both physical and organisational assets.
The risks facing Australian businesses broadly align with those identified globally via other Aon risk surveys in other geographies; although the survey identified two primary differences. Significantly, where cyber security continues to be a key concern in other countries, only 13 per cent of risk managers identified it as a significant risk in Australia. Similarly, terrorism remains relatively overlooked, indicating that Australian companies consider themselves less susceptible in comparison to their international counterparts.
“Changing trading conditions, the weakening of the Australian dollar and the evolving political landscape, aligned with relatively high unemployment and an ongoing skills gap in some of Australia’s most pertinent industry sectors, have presented a challenging risk environment for organisations to try and manage” comments Mr. Disborough.
“It is, therefore, more critical than ever for organisations to develop efficient and effective risk management solutions, while remaining flexible and responsive to changes in both the local and global economy. Without such support it will be impossible for Australian industries to innovate successfully to overcome such challenges,” he concluded.
About Aon’s 2014/2015 Australian Risk Survey
Aon’s 2014/2015 Australian Risk Survey collates 13 years of risk insight to provide a deeper understanding of today’s key risk concerns. In doing this, it provides Australian organisations with a snapshot of how their risk management practices measure up against industry peers and competitors, and can be used as a tool to help predict and manage their risk profiles more effectively.
The primary objective of this survey is to provide assistance to those working in risk management functions in assessing how their organisation manages risk compared to others, and to measure the costs incurred in delivering a risk management and financing strategy.
The report provides insights and analytics on:
- Key risk concerns
- Risk management trends and strategies
- Insurance market trends
- Total Cost of Insurable Risk (TCOIR)