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Global Risk Outlook

Posted By IrmsaInsight, 07 June 2013
Updated: 06 June 2013

In 2011, the AON group conducted a survey on key globally risks and the following were listed as the top 20:
1.Economic slowdown 
2.Regulatory/legislative changes 
3.Increasing competition 
4.Damage to reputation/brand
5.Business interruption 
6.Failure to innovate/meet customer needs 
7.Failure to attract or retain top talent
8.Commodity price risk 
9.Technology failure/system failure 
10.Cashflow/liquidity risk 

In a similar survey, conducted this time by Ernst & Young – the top ten risks back in 2009 were:
1.The credit crunch 
2.Regulation and compliance 
3.Deepening recession 
4.Radical greening 
5.Non-traditional entrants 
6.Cost cutting 
7.Managing talent 
8.Executing alliances and transaction 
9.Business model redundancy 
10.Reputation risks 

It is clear from the above that concerns around the world economic conditions, regulatory changes, talent management, competition and reputation management remain the key concern of companies across the group.

The survey further reveals the following around identifying, assessing, measuring and managing risks: "Senior management’s intuition and experience remain the primary method used by survey respondents to identify and assess major risks facing their organisations, followed by business unit risk registers or key risk indicator worksheets and structured enterprise-wide approach.” 

The encouraging signs around the growth of the risk management discipline is that it remains a firm item on the board agendas of most companies and that there is a growing trend of establishing policies on risk oversight and management to guide practices within organisations. 

In addition, the survey also reveals that 70% of the companies surveyed have a formal risk management department and 31% of the companies are growing the function of risk by appointing a Chief Risk Officer, especially in the more regulated industries.

The survey observed an interesting trend that: "While it is hard to predict which risk might emerge and demand our immediate attention, we can be certain that successful companies will not be the ones taking a "wait and see” approach. Instead they will be the ones who prepare themselves thoroughly to anticipate future needs and undertake the difficult process of finding solutions to address them. 

These proactive companies will not just fix what is broken, but view the current environment an opportunity to sustain themselves for the future. The world is continuing to recover from the recession, conditions remain challenging and risk retains a high position on every organisations’ agenda.

A total number of 960 companies around the globe responded to the survey, from a variety of industries including: agribusiness, banking, aviation, education, healthcare, hospitality, telecommunication, real estate and natural resources. 

Looking at the top risks, South African companies have to continue navigating the global economic conditions. Recently, the Governor of the South African Reserve Bank pointed out that concerns around the fluctuating oil prices remain one of the key concerns. Locally, the stability of the mining sector and impact on the country’s GDP remains a concern.
Furthermore, the local companies continue to find their way around Consumer Protection Act and the Companies Act introduced in 2011. There are other legislations such as the Protection of Personal Information which are still in the pipeline. 
The risks that did not make the top 10 but are still high on the priority list of the many companies include: Failure of disaster recovery plans; mergers, acquisitions and restructuring; injury to workers; third party liabilities and political uncertainties.

AON Global Risk report 2011
Ernst & Young global risks report 2009

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