Top 6 Risks for Insurers in 2013
6. Business interruption: While business interruptions typically conjure up the image of major disasters that create havoc and impact whole communities, such as hurricanes, earthquakes or terrorist attacks, one cannot ignore those occurring on a smaller scale that might not make headlinesa power outage or water main break in the immediate area, fire in a room of a building, a bomb threat, or a workplace violence incident. Organizations must effectively address this risk by identifying all potential threats to their business and evaluating their mitigation options for each threat.
5. Failure to innovate/meet customer needs: Oftentimes, companies equate innovation with technological upgrades or massive (and often costly) research and development projects, but experts say innovation is more about engaging employees at every level to think creatively about the design of powerful futures. To promote innovation, companies should foster an innovation culture from the CEO down.
4. Damage to reputation/brand: The unpredictable nature of reputational and brand-related events continues to elude companies, which see damage to reputation/brand as a top risk concern. For many organizations, a comprehensive reputation risk control strategy can prevent a critical event from turning into an uncontrollable crisis and help maximize the probability of recovery. Those that have a firm grip on their brand and are better prepared can weather a crisis with minimum damage.
3. Economic slowdown/slow recovery: While 16 of the 28 industries ranked economic slowdown/slow recovery as the top risk facing organizations, insurers ranked it third. This risk has also been cited as causing the greatest reported income loss, and when asked to rank the overall top risks three years from now, respondents project that economic slowdown will continue to dominate the list. Organizations must plan for this risk by learning from lessons in the past, stepping out of their day-to-day operations, thinking in terms of organizational readiness for the future and remaining flexible enough to adapt.
2. Increasing competition: Increased competition is ranked number two for big conglomerates as well as the construction, insurance, investment and finance industries. Increased competition can lower market share and decrease profits for a company. While larger business organizations may be able to fend off higher amounts of competition than smaller ones with limited resources, all organizations, regardless of size, see competition as a high-priority risk.
1. Regulatory/legislative changes: Regulatory/legislative changes is considered the number one risk by banks, the government, health care, insurers, as well as companies in investment and finance, pharmaceuticals and biotechnology, telecommunications and broadcasting, and lastly, utilitiesall of which are traditionally subject to heavy regulations.
Regulatory/legislative changes and increasing competition are at the top of the list of major risks insurers are facing, according to the biannual "Aon Global Risk Management Survey" from Aon Risk Solutions.
The full survey identifies the top 10 risks as well as hidden risks facing organizations in a number of industries today. The collective top 10 risks included risks such as commodity price risk and cash flow/liquidity, which were not at the top of insurers' lists.
Results of the survey of risk managers, CROs, CFOs, treasurers and others point to a significant decline in risk readiness among many of the survey respondents and illustrate the importance of no longer evaluating risk in isolation but considering the relation of risks to establish and maintain a successful risk management program, according to Aon. It's important to look at how all of the risks connect to each other, said Stephen Cross, CEO of Aon Global Risk Consulting.
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