Top 10 business risks of 2013

Business risks today are global, spanning industries as well as borders. According to Aon Risk Solutions, even the most seasoned risk managers find it a challenge to anticipate and respond effectively to the increasingly expansive and evolving threats to their organizations. 

Aon Risk Solutions released its bi-annual 2013 Global Risk Management Survey, and found that, on average, reported loss of income from the top 10 reported risks has increased from 28 percent in 2011 to 42 in 2013, while reported risk readiness has dropped 7 percent.

For the third straight survey, “economic slowdown/slow recovery” has been ranked as the top risk facing organizations, while “political risk/uncertainties” entered the top 10 for the first time. 

Conducted in 2012’s fourth quarter, the survey gathered input from 1,415 respondents, which represent public and private companies of all sizes around the globe across many industries.

Click “Next” to see the top 10 risks as reported by the survey respondents.

1. Economic slowdown/slow recovery

Since concerns over the world’s economy will not go away soon, Aon says organizations need to embrace it for the long-term and from a global perspective. We are no longer sitting on an island by ourselves. What happens on the other side of the world can have a direct impact on every organization, whether it has international operations or not. For example, during the financial crisis, the drop in real estate values, record high foreclosure rates and default rates on loans in the U.S.triggered a worldwide credit crisis that affected businesses everywhere, making it harder for them to obtain loans and expand. 

Therefore, says Aon organizations must plan for this risk by learning from lessons in the past, stepping out of their day-to-day operations and thinking in terms of organizational readiness for the future.

Where each industry ranked this risk

1st:

Aviation 

Chemicals 

Conglomerate

Consumer Goods Manufacturing

Construction

Hotels and Hospitality

Lumber, Furniture, Paper and Packaging

Machinery and Equipment Manufacturers

Metal Milling and Manufacturing

Non-Aviation Transportation Manufacturing

Non-Aviation Transportation Services

Professional and Personal Services

Real Estate

Rubber, Plastics, Stone and Cement

Technology

Wholesale Trade

2nd:

Banks 

Government 

Retail Trade 

3rd:

Educational and Nonprofits

Healthcare

Insurance, Investment and Finance

Pharmaceuticals and Biotechnology

Telecommunications and Broadcasting

5th:

Natural Resources (Oil, Gas and Mining) 

Utilities

6th:

Agribusiness

Food Processing and Distribution

2. Regulatory/legislative changes

Since the financial meltdown in 2009, Aon says governments around the world have stepped up their regulatory functions and are becoming more robust in setting and determining policies for businesses, not simply for the financial sector, but for industries across the board. While most companies accept the need for rules to govern business and are accustomed to working within regulatory constraints, the sheer volume and complexity of these rules can still be daunting, not to mention the frequency with which they change. 

Aon notes the irony in regulations — designed to help businesses mitigate risks — being perceived as a key risk factor facing businesses. More companies see the increasingly stringent regulations as intrusive and burdensome.

Where each industry ranked this risk

1st:

Banks 

Government 

Healthcare 

Insurance, Investment and Finance 

Pharmaceuticals and Biotechnology 

Telecommunications and Broadcasting 

Utilities

2nd:

Educational and Nonprofits 

Non-Aviation Transportation Services 

Professional and Personal Services

Real Estate

3rd:

Agribusiness

Natural Resources (Oil, Gas and Mining)

Non-Aviation Transportation Manufacturing

4th:

Aviation

Wholesale Trade

5th:

Lumber, Furniture, Paper and Packaging

Rubber, Plastics, Stone and Cement

6th:

Chemicals 

Construction

Metal Milling and Manufacturing

8th:

Consumer Goods Manufacturing

Food Processing and Distribution

Hotels and Hospitality

Retail Trade

9th:

Conglomerate

Technology

11th:

Machinery and Equipment Manufacturers 

3. Increasing competition

Increased competition has a direct and lasting impact on earnings, says Aon. At present, a weakened global economy means that consumers have less disposable income and companies are competing for a smaller base of clients with decreased spending power. Therefore, increasing competition has made it imperative for companies to focus on innovation, brand recognition and product differentiation to survive and thrive.

Where each industry ranked this risk

1st:

Retail Trade

2nd:

Aviation 

Conglomerate

Construction 

Insurance, Investment and Finance 

Pharmaceuticals and Biotechnology 

Rubber, Plastics, Stone and Cement 

Technology

Telecommunications and Broadcasting

3rd:

Hotels and Hospitality 

Non-Aviation Transportation Manufacturing 

Non-Aviation Transportation Services

Professional and Personal Services

Wholesale Trade

4th:

Chemicals 

Consumer Goods Manufacturing 

Educational and Nonprofits 

Healthcare 

Lumber, Furniture, Paper and Packaging 

Metal Milling and Manufacturing 

5th:

Banks

Machinery and Equipment Manufacturers 

6th:

Agribusiness

9th:

Real Estate

10th:

Food Processing and Distribution 

14th:

Natural Resources (Oil, Gas and Mining)

18th:

Utilities

26th:

Government

4. Damage to reputation/brand

Since reputational events often arrive with little or no warning, organizations are forced to respond in real time and economic losses are mounting. Aon says the unpredictable nature of reputational and brand-related events continues to elude companies.

In the survey, respondents say that losses of income in the last 12 months increased dramatically rising from 8 percent in 2011 to 40 percent in 2013. The increase could be driven by organizations’ improved abilities to identify and measure losses associated with reputational risks, and also by the impact of social media and its abilities to make any news feed viral.

Where each industry ranked this risk

1st:

Educational and Nonprofits

2nd:

Food Processing and Distribution

Hotels and Hospitality

3rd:

Banks

Pharmaceuticals and Biotechnology

Real Estate

Retail Trade

4th:

Aviation

Conglomerate

Insurance, Investment and Finance

5th:

Healthcare

Professional and Personal Services

6th:

Technology

7th:

Telecommunications and Broadcasting

Consumer Goods Manufacturing

8th:

Utilities

9th:

Non-Aviation Transportation Manufacturing

11th:

Lumber, Furniture, Paper and Packaging

Natural Resources (Oil, Gas and Mining)

13th:

Construction

Machinery and Equipment Manufacturers

14th:

Metal Milling and Manufacturing

15th:

Agribusiness

16th:

Chemicals

Government

Non-Aviation Transportation Services

17th:

Wholesale Trade

21st:

Rubber, Plastics, Stone and Cement

5. Failure to attract or retain top talent

Talent is a scarce commodity, and with the economic recovery underway, competition for talent can become fierce, says Aon. People are looking for companies which are market leaders and where their expertise will be treasured.

Overall, Aon says the survey underscores the importance for organizations to keep attracting and retaining talent a key business strategy. This includes ensuring that leaders set the tone, build relationships, show their commitment to their talent and hold themselves accountable in meaningful ways.

Where each industry ranked this risk

2nd:

Government 

Healthcare

3rd:

Technology

4th:

Metal Milling and Manufacturing 

Natural Resources (Oil, Gas and Mining)

Professional and Personal Services

5th:

Educational and Nonprofits

Lumber, Furniture, Paper and Packaging

7th:

Chemicals 

Non-Aviation Transportation Manufacturing

8th:

Banks 

Insurance, Investment and Finance

Pharmaceuticals and Biotechnology 

Telecommunications and Broadcasting

9th:

Aviation 

Conglomerate

Non-Aviation Transportation Services 

Retail Trade

11th:

Consumer Goods Manufacturing 

Construction 

Machinery and Equipment Manufacturers

15th:

Agribusiness

16th:

Food Processing and Distribution

Utilities

17th:

Real Estate

18th:

Hotels and Hospitality

22nd:

Wholesale Trade

24th:

Rubber, Plastics, Stone and Cement

6. Failure to innovate/meet customer needs

Oftentimes, says Aon, 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. 

Innovation often comes from the producer — not from the customer. Aon notes that Henry Ford once said that if he’d asked his customers what they wanted, they would’ve asked for a faster horse.

Where each industry ranked this risk

3rd:

Aviation

Technology

4th:

Conglomerate

Government