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2017 RIMS

Feeling Unprepared to Deal With Risks

Damage to brand and reputation ranked as the top risk concern of risk managers throughout the world.
By: | April 25, 2017 • 3 min read

Geopolitical uncertainty, challenging demographics and a difficult economy are making it harder for risk managers to protect their organizations.

“Certainly there is a feeling and understanding that the risk environment is changing, and changing really fast,” said Rory Moloney, CEO of Aon Global Risk Consulting, during the RIMS 2017 conference.

Rory Moloney, CEO, Aon Global Risk Consulting

Aon’s “2017 Global Risk Management Survey,” he said, asked its 1,800 respondents, “How prepared are you?” and the results are “at its lowest point now since we started this in 2007.”

“They are sensitive to the volatility and feel less prepared,” Moloney said.

The survey found that the No. 1 global risk in 2017 was “damage to brand and reputation.” And that, too, is partly caused by the pace of change as well as the growth of 24/7 news channels and the use of social media.

“In the age of Twitter and viral videos, damage to reputation could occur because of an inappropriate tweet by an executive, or a video by an employee complaining about sexual harassment or discrimination,” according to the report.

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Regardless of the difficulty faced by a company, whether it is a product recall, supply chain failure, fraudulent act or cyber event, “the worry is just that the amplification is out there and it happens so quickly,” he said

Nearly half (45 percent) of the respondents identified brand and reputation damage as their top risk concern,while only 51 percent believed they were prepared to deal with the challenge, according to the survey.

The top 10 risks, in order, are:

  • Damage to reputation/brand;
  • Economic slowdown/slow recovery;
  • Increasing competition;
  • Regulatory/legislative changes;
  • Cyber crime/hacking/viruses/malicious codes;
  • Failure to innovate/meet customer needs;
  • Failure to attract or retain top talent;
  • Business interruption;
  • Political risk/uncertainties; and
  • Third-party liability (including E&O).

Of the top 10 risks, half are uninsurable, while three are partially insurable, according to Aon. Only two (business interruption and third-party liability) are insurable.

Cyber risk moved up from nine in 2015 on the list to five this year – but it was No. 1 for risk managers in North America, Moloney said.

In the intervening years, the risk has expanded from disclosure of personally identifiable information from retail, health care or education organizations, to include fears of business interruption and disruption of production processors and controllers, Moloney said.

Readiness by risk managers to deal with cyber risk declined overall from 82 percent in 2015, to 79 percent in 2017, according to the report.

It is critical that business and policy leaders understand which disruptive technologies will matter to them, and prepare accordingly.

In addition, multinational companies need to prepare for new data protection rules that go into effect in the EU in May 2018. Failure to comply could result in penalties of up to 4 percent of worldwide earnings, he said.

As risk managers face geopolitical uncertainty, only 23 percent of them feel prepared to deal with the potential changes facing their organizations.

“Companies can’t control the geopolitical environment,” Moloney said.

They also can’t control the aging of the workforce, which continues to creep up. Organizations need to devote resources to attract, retain and develop employees, while continuing to grapple with a multitude of other pressing risks.

To be effective, risk managers need an integrated, holistic risk management strategy that looks “top down and bottom up” at all of their organizations’ exposures, Moloney said.

He noted that two new risks entered the survey respondents’ concerns for 2017: disruptive technologies/innovation, and major project failure.

Disruptive technologies, which includes 3D printing, the Internet of Things and ride-sharing companies, among many other innovations, ranked No. 20 on the 2017 risk management risks, and respondents forecast it to move up to No. 10 in 2020.

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“It is critical that business and policy leaders understand which technologies will matter to them, and prepare accordingly,” according to the report.

Major project failure ranked No. 15 because of the potential to “undermine a company’s reputation and in many cases put a company on the brink of bankruptcy,” according to Aon.

“While major project failure is sometimes caused by external factors – such as regime change, government policy adjustment, terrorist attacks or a natural disaster – experts also attribute it to internal elements, such as failures related to market and strategies, organizational planning, leadership and governance, underestimation in analysis, quality, risk prediction, skills and competency, and teamwork and communications,” according to the report.

Additional stories from RIMS 2017:

Blockchain Pros and Cons

If barriers to implementation are brought down, blockchain offers potential for financial institutions.

Embrace the Internet of Things

Risk managers can use IoT for data analytics and other risk mitigation needs, but connected devices also offer a multitude of exposures.

Reviewing Medical Marijuana Claims

Liberty Mutual appears to be the first carrier to create a workflow process for evaluating medical marijuana expense reimbursement requests.

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.

RIMS Conference Held in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.

Resilience in Face of Cyber

New cyber model platforms will help insurers better manage aggregation risk within their books of business.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

The Profession

Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]