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Global risk management survey highlights top risks by region and industry

20 April 2009

In a rapidly changing and increasingly challenging world, every organization is facing more complex risks that carry greater severity. The ability to understand, track and adjust to worldwide trends can mean the difference between success and failure.

In October and November 2008, Aon worked with leading organizations around the world to find out their views of emerging and escalating business risks, and the steps they are taking to address these challenges. Aon have studied and analyzed the findings, and compiled the 2009 Global Risk Management Survey report.

The biennial analysis is based on responses from 551 organizations in 40 countries. The findings are representative of a broad range of industry sectors around the globe and presented in four key components:

• Top ten risks
• Overall risk preparedness
• Business losses related to risk
• Key business topics/functions

The survey found that the current top ten risks are:

1. Economic slowdown
2. Regulatory/legislative changes
3. Business interruption
4. Increasing competition (new addition to top ten since 2007 report)
5. Commodity price risk (new addition to top ten since 2007 report)
6. Damage to reputation
7. Cash flow/liquidity risk
8. Distribution or supply chain failure (new addition to top ten since 2007 report)
9. Third party liability
10. Failure to attract or retain top talent

In addition to the macro list provided above, the Global Risk Management Survey breaks out the top ten risks by region and identifies the top three risks by industry.

Compared to findings in 2007, most organizations have increased their overall risk preparedness. However, less than half of survey respondents report they are tracking and managing all components of their total cost of insurable risk. More importantly, for three of the top ten risks (economic slowdown, damage to reputation and regulatory/legislative changes), less than two thirds of respondents indicate they have formally reviewed the risk or have a plan in place.

The 2009 Aon survey indicates that virtually no company, industry or country is immune to today's unprecedented period of economic unrest. While reputation risk has fallen from its top position in the firm's 2007 survey, the importance of this threat is not diminished. Reputation risks impact the public's perception of the quality, integrity and intention of an organization, influence a partner or customer's decision to do business with a firm and may affect a government or regulator's decision to allow a company's actions. Regulations and legislation are now perceived as the second greatest risk factors facing business, according to the Aon survey. While it remains unclear as to whether more stringent regulations are expected to expand to the majority of industry sectors, an increase in regulation within the financial sector is widely anticipated. For multinational organizations, the cost, quantity and complexity of regulations presents serious compliance challenges.

"While these complex risks carry with them a degree of unpredictability that may impact an entire enterprise, they are in fact manageable," said Stephen Cross, CEO of Aon Global Risk Consulting. "Those organizations prepared to capture opportunity will lead the way out of the economic downturn with robust and proven risk management strategies in place, and clear objectives set for future success."

For more information and to register for your copy of the survey, visit www.aon.com/2009risksurvey.