Survey highlights the growing interconnectivity of risks, as firms shift focus to impact-based risk assessments
Aon has announced the top ranked risks for Australian organisations with the launch of the 2021 Global Risk Management Survey.
With more emphasis and reliance on technology, cyber risk topped the list as the number one current and predicted future risk in Australia and globally, its highest rank since the inception of the survey. Cyber was also cited in the top 10 list of risks across each region, industry and respondent type globally.
The latest survey has also highlighted the growing interconnectivity of risks, with Damage to Reputation and Failure to Innovate rounding out the top three risks facing Australian businesses in 2021.
The past two years have proved to be incredibly volatile, with the global COVID-19 pandemic having had a ripple effect across other types of risk, such as heightened awareness of reputation and cyber, as long-tail risks have become increasingly important to manage.
The top 10 risks also strongly reflect the current landscape, namely COVID-19 and its impact on organisations. Amidst a backdrop of challenging market conditions, this is testing the ability of firms to manage volatility and make better decisions.
Organisations are shifting their focus from event-based to impact-based risk assessments: for example, business interruption was once seen as a linear risk, but the COVID-19 pandemic has demonstrated how it can affect multiple industries and companies simultaneously and globally.
“It is notable that the sharp move of cyber from fifth position to first in the course of two years speaks to the pervasiveness of the risk. Australian organisations have become acutely aware of the severity of these attacks as we’ve seen businesses thwarted overnight, with some never to recover. Failure to appropriately assess, quantify and transfer your cyber risk is also the root cause of many of the other risks ranked in the top five,” said Jennifer Richards, CEO, Australia, at Aon.
Exacerbated by the COVID-19 pandemic, and highlighting the interconnectivity of risk, the top 10 risks in Australia according to the 2021 Global Risk Management Survey are:
- Cyber Attacks / Data Breach
- Damage to Reputation / Brand
- Failure to Innovate / Meet Customer Needs
- Business Interruption
- Failure to Attract or Retain Top Talent
- Regulatory / Legislative Change
- Economic Slowdown / Slow Recovery
- Cash Flow / Liquidity Risk
- Pandemic Risk / Health Crises
- Increasing Competition
“The world is a more volatile place and the importance of better decision making has never been greater. Long-tail risks are not single events. They’re innately interconnected, as we’ve seen with the COVID-19 pandemic fundamentally changing the way the world works, revealing new risks and re-ordering priorities in the C-suite.
”These risks are on our doorstep. There is an increasing realisation of the need to address these ‘known unknowns.’ As we face unprecedented events, the challenge will be how to best develop solutions to properly prepare for and manage through them,” concluded Richards.