Global risk readiness is at an all-time low, as Asia-Pacific risk managers fear reputational damage and increasing competition, according to a new survey from Aon.

Companies are less prepared to face global risks than any point over the past 12 years, according to Aon’s Global Risk Management Survey. The fast pace of technological change, and volatile global conditions, have left companies facing uninsurable and unpredictable risks, the report says.

The survey provides a glimpse into the fears of Asia-Pacific risk managers. Companies in the region said their top five risks were damage to brand/reputation, increasing competition, business interruption, economic slowdown, and accelerated change in markets.

Risk readiness for top 10 risks across Asia-Pacific companies was said to be just 51%, according to the survey. In contrast, businesses had a risk readiness of more than 66% two years ago.

Damage to brand and reputation is viewed as a leading risk in APAC following US charges against Chinese technology company Huawei for violating sanctions against Iran, Aon said. The report suggests the trial of former Nissan chairman Carlos Ghosn has also increased fears of reputational damage.

APAC’s top risks are likely to change in the next few years, according to the report. Aon predicts an economic slowdown, cash flow risk, increasing competition, accelerated change, and damage to brand/reputation will be the chief concerns in three years.

Increasing competition is a major fear for companies in the region already. It is viewed as a particular concern in Asia due to excessive labour capacities, low barriers to entry, and the risk maturity of multinationals, Aon said. Companies operating in the region’s established economies, such as Japan and Australia, are said to fear well-funded Chinese entrants with low costs of capital. Aon called on companies to embrace new technology and business models to adapt to the competition.

The report has some encouraging findings for APAC risk managers. Asia-Pacific respondents have fewer needs to improve the effectiveness of their risk management functions, the report states.

Risk management and insurance functions also have a strong profile within Asia-Pacific businesses, according to the report. Risk/insurance had a profile of 6.86 out of ten in APAC companies, compared to 6.60 in Europe. While 83% of APAC risk management programmes have cross-operational input, compared to just 75% in Europe.

Australian companies picked brand and reputational damage as their top risk in the current environment. Fears of an economic slowdown — despite Australia not having a recession for more than 25 years — was picked as the second biggest risk.

Australian companies selected business interruption, accelerated rates of change, and a failure to retain and attract talent as their other leading risks right now.

Bruce Gordon, Managing Director for Aon in Australia, said the recent property crash and political uncertainty were concerns in the country.

“Despite it being more than a quarter of a century since the last Australian recession, fears for the domestic economy, fuelled by the decline in the property market and electoral uncertainty, have pushed this risk up six places since the 2017 survey,” Gordon said.

Gordon said reputational risk has grown alongside the rise of social media. “Whether it is the threat of cyber-attacks or a major project failure, the prevalence of social media and the 24/7 news cycle has the potential to create rapid contagion and this can have an immediate and lasting impact on an organisation’s shareholder value and reputation.”

Australian risk managers broadly agreed with the top risks selected by companies in the report. Kevin Bates, President of RIMS Australia, said reputational damage and an economic slowdown “are ones which risk professionals and c-suite executives are spending a lot of time working on”.

Bates added: “I am a little surprised to find that political instability is not higher up; as the simple fact is that political instability is largely a driving factor of an economic slowdown.”

James Beck, director of Australian risk specialist Effective Governance, said regulatory and legislative changes (ranked the 9th top risk by Australian companies) were sure to be significant risks in the wake of the Royal Commission into financial services misconduct.

Beck said: “The recent Hayne Report raised focusing on non-financial risks, which can be better referred to as culture and conduct risks. Companies should not be complacent using staff satisfaction surveys as a tool to assess.”

He added: “There will be legislative changes around accountability to the organisation culture, it is just a matter of time, especially with the upcoming Royal Commission into Aged Care.”

Beck said Aon’s report might have missed the “biggest risk of them all” — conduct and culture. He added: “Organisations should be focused on how they truly understand the cultural expectations of the board, and how the executive interpret that through to the staff at the front line. This can only be assessed independently, similar to an external financial audit.”