A new wave of interrelated, fast-changing risks, reflecting rapid changes in the global economic landscape and the increasing role of technology and multinational expansion as growth drivers, tops the list of concerns for businesses across Europe, the Middle East and Africa according to new research published today by ACE European Group.
Risk managers identify technology, supply chain and regulatory as the “big three” risks currently causing their organisations the greatest concern, according to a survey of 500 companies in Europe, the Middle East and Africa conducted for global insurer ACE’s Emerging Risks Barometer 2015. People risk sits just outside the top-three, while geopolitical risk completes the top-five emerging risk categories.
43 per cent of businesses say that technology risk – which includes cyber-attack, data loss and business interruption as a result of systems failure – is currently among their greatest concerns. Tech also tops the list of risks that businesess expect to have the biggest financial impact for their operations in the next two years. Technology plays a critical role in almost every business’ strategic planning, yet, the research shows that companies may not be focusing their efforts in the right areas, due to a lack of knowledge about the most likely sources of threat. It is indicative that less than a quarter (23 per cent) of respondents say their biggest concern is violation of customer data, in spite of the huge potential financial and reputational cost of such attacks.
Supply chain risk ranks second, named by 31 per cent. Supply chain topped the 2013 Barometer, and remains a top concern for businesses two years after. With more companies expanding into new and often emerging markets – using more complex and extended networks of suppliers and partners – the supply chain is at once a growth enabler and a key source of risk. However, in what is one of the survey’s clearest indications of how different areas of risk are increasingly interconnected, businesses are now less concerned about interruption caused by natural disasters and are focusing on issues that can severely harm their corporate reputations. Survey respondents rank unethical labour practices as their biggest supply chain worry. More than six out of ten (61 per cent) admit they cannot always vouch for the ethical and trading standards of every company on which they rely.
Regulatory and compliance risk ranks third, named by 27 per cent. As companies pursue growth on a global scale, regulation is becoming an increasing source of concern with multinational organisations now facing a patchwork of regulatory regimes across markets and jurisdictions. Importantly, 56 per cent of respondents say their company directors may not fully understand the governance and compliance requirements in every country for which they have oversight/responsibility. Seven out of ten risk managers are concerned that regulatory demands are diverting resources from other areas of the business.
“If you isolate the results for Africa, the survey shows a new wave of fast-changing risks emerging on the African continent. Technology risk is the most likely cause for concern for African respondents, followed by regulatory and compliance risk and supply chain risk. Effective action requires organisations to have board-level commitment, an integrated risk management approach and a clearly understood risk management culture.
Encouragingly for the African insurance industry, our research suggests that the overwhelming majority of risk managers surveyed regard insurance as a key part of the solution in managing the risks causing the greatest concern. Risk managers however warn that the insurance industry still has more to offer and needs to further develop its capabilities around emerging risks. Almost half believe that the industry could improve its offering around technology risk and more than a third want to see the industry make progress around people risk,” Gary Jack, Country President, ACE South Africa, said.
“We at ACE are responding to the challenge by positioning ourselves as long-term strategic business partners to our brokers and risk managers. We are ready to help manage these emerging risks,” he added.
ACE’s Emerging Risk Barometer includes detailed information and statistics on all these risk categories, information on how different industry sectors view risk and extensive commentary on the management of emerging risks.