People risk, supply chain issues and regulatory compliance are the top three risks for doing business across international borders
People risk is the most pressing issue for 50% of risk managers operating in Asia-Pacific.
More risk managers in the region said a people risk event was ‘likely’ or ‘very likely’ to occur within the next 12 months, ahead of other key risk events such as cyber breaches, supply chain issues or extreme weather events.
This was one of the key findings of the inaugural StrategicRISK benchmarking study that examined the risk of doing business across international borders.
More than 60 risk managers from around Asia-Pacific took part in the research, which aimed to find out which international risks are most likely to impact businesses and how the companies are managing these.
The results from the survey aim to provide risk and insurance managers with comparative data and additional material to enable them to benchmark their roles, internal risk function and risk priorities.
According to respondents, the top three risks to impact international business are: people risk, supply chain risk and regulatory compliance.
A risk manager from a major airline in the region told StrategicRISK that this came as “no surprise”.
“Today risk managers have to look at managing risks across many geographical areas, involving diverse cultures and regulatory operating environments, and yet continue to be exposed to impacts such as cyber attacks that are not bound by any physical barriers.”
Another risk manager from a Singapore public health care group agreed. He said: “You can have the best machines, the best methods (policy and processes) and materials (resources), but when you do not have the best manpower (right people in place) it is the biggest risk.
“This risk is exacerbated by the current war for talent in almost all sectors and the shortage of qualified healthcare professionals in Singapore and the region.”
For Vincent Ho, safety manager at MTR, the rapid transit railway system in Hong Kong, people risk was also deserving of its top spot on the list.
“As businesses go global, many operations start to see their workplace expand into unknown territories and also in area where skillful labour is a scarce resource. We have seen a whole team of staff jump from a company to another overnight,” he said.
“People risk can significantly affect the quality standard of a company and cause immediate effect on the bottom line.”
Myanmar Brewery head of risk management, processes and internal controls Jagath Guru added that it was a generational problem.
“The problem of Generation Y is that they do not stay long in an organisation,” he said, adding that many employees are also pursuing opportunities outside of their home countries in search of better living standards.
Cyber threat
But InterContinental Hotel Group, director of corporate risk and reputation, risk management, greater China, Rudi Wertheim said he was somewhat surprised by the results.
“I’m not discounting the people risk but my view is that the single biggest threat that could potentially have the most catastrophic consequences [on a company] is cyber,” he said.
“People can get at data so easily, and clearly if you’re in any industry where people have to trust you in order to do business with you and if a cyber event breaks that trust then you’ve got a huge problem.
“As I see it, people risk is somewhere below cyber in terms of its potential to ‘break’ a company. But in terms of it being something that we need to be tackling on an ongoing basis, it’s absolutely right up there.”
Top risks
Overall risks of highest concern
| Risk | Total |
|---|---|
|
3.35 |
|
3.28 |
|
3.27 |
|
3.22 |
|
3.13 |
|
3.02 |
|
3.01 |
|
2.97 |
|
2.82 |
|
2.75 |
(*combination of most likely and highest financial impact)
Top 10 risks most likely to occur
| Likelihood | |
|---|---|
|
3.52 |
|
3.23 |
|
3.20 |
|
3.20 |
|
2.98 |
|
2.91 |
|
2.89 |
|
2.78 |
|
2.78 |
|
2.75 |
|
2.69 |
Top 10 risks with the highest financial impact
| Financial impact | |
|---|---|
|
3.34 |
|
3.34 |
|
3.28 |
|
3.26 |
|
3.25 |
|
3.19 |
|
3.12 |
|
3.03 |
|
2.95 |
|
2.94 |
Methodology
Respondents were asked to rate 19 different risks by the likelihood of a risk event occurring in the next 12 months and the estimated financial impact this would have on their business. They were asked to rate each risk event by both likelihood and financial impact on a scale of 1-5 (1 being very low, 2 being low, 3 being medium, 4 being high and 5 being very high).
To plot the scatter graph the average likelihood and financial impact score was calculated for each risk and plotted along the x-axis and y-axis, respectively. The scatter graph also displays the average likelihood (2.7) and financial impact (2.9) scores across all risks. Those risks in the top right hand corner of the graph were rated by respondents as having above-average likelihood of occurring in the next 12 months and were deemed to have an above-average financial impact if they were to occur.
To identify the risks of highest concern (that is, those most likely to occur with the highest financial impact) a combined average score was calculated for both likelihood and financial impact for each risk and ranked in order of size. The higher the score, the more likely a risk is to occur and have a high financial impact.
The Knowledge: Part 1
These survey findings are a highlight of a soon-to-be released supplement by StrategicRISK on international risks. Known as The Knowledge, the three-part series is produced in association with Zurich and aims to provide risk and insurance managers with comparative data and additional material to enable them to benchmark their roles, internal risk function and risk priorities.
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