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

Risk Management

The Profession

As a professor of business, Jack Hampton knows firsthand the positive impact education has on risk managers as they tackle growing risks.
By: | April 9, 2018 • 4 min read

R&I: Who is your mentor and why?

Ellen Thrower, president (retired), The College of Insurance, introduced me to the importance of insurance as a component of risk management. Further, she encouraged me to explore strategic and operational risk as foundation topics shaping the role of the modern risk manager.

Chris Mandel, former president of RIMS and Risk Manager of the Year, introduced me to the emerging area of enterprise risk management. He helped me recognize the need to align hazard, strategic, operational and financial risk into a single framework. He gave me the perspective of ERM in a high-tech environment, using USAA as a model program that later won an excellence award for innovation.

Bob Morrell, founder and former CEO of Riskonnect, showed me how technology could be applied to solving serious risk management and governance problems. He created a platform that made some of my ideas practical and extended them into a highly-successful enterprise that served risk and governance management needs of major corporations.

R&I: How did you come to work in this industry?

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From a background in corporate finance and commercial banking, I accepted the position of provost of The College of Insurance. Recognizing my limited prior knowledge in the field, I became a student of insurance and risk management leading to authorship of books on hazard and financial risk. This led to industry consulting, as well as to the development of graduate-level courses and concentrations in MBA programs.

R&I: What was your first job?

The provost position was the first job I had in the industry, after serving as dean of the Seton Hall University School of Business and founding The Princeton Consulting Group. Earlier positions were in business development with Marine Transport Lines, consulting in commercial banking and college professorships.

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

Creating a risk management concentration in the MBA program at Saint Peter’s, co-founding the Russian Risk Management Society (RUSRISK), and writing “Fundamentals of Enterprise Risk Management” and the “AMA Handbook of Financial Risk Management.”

A few years ago, I expanded into risk management in higher education. From 2017 into 2018, Rowman and Littlefield published my four books that address risks facing colleges and universities, professors, students and parents.

Jack Hampton, Professor of Business, St. Peter’s University

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

The Godfather. I see it as a story of managing risk, even as the behavior of its leading characters create risk for others.

R&I: What is your favorite drink?

Jameson’s Irish whiskey. Mixed with a little ice, it is a serious rival for Johnny Walker Gold scotch and Jack Daniel’s Tennessee whiskey.

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

Mount Etna, Taormina, and Agrigento, Sicily. I actually supervised an MBA program in Siracusa and learned about risk from a new perspective.

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

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Army Airborne training and jumping out of an airplane. Fortunately, I never had to do it in combat even though I served in Vietnam.

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

George C. Marshall, one of the most decorated military leaders in American history, architect of the economic recovery program for Europe after World War II, and recipient of the 1953 Nobel Peace Prize. For Marshall, it was not just about winning the war. It was also about winning the peace.

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

Sharing lessons with colleagues and students by writing, publishing and teaching. A professor with a knowledge of risk management does not only share lessons. The professor is also a student when MBA candidates talk about the risks they manage every day.

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

Sensitizing for-profit, nonprofit and governmental agencies to the exposures and complexities facing their organizations. Sometimes we focus too much on strategies that sound good but do not withstand closer examination. Risk managers help organizations make better decisions.

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

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Developing executive training programs to help risk managers assume C-suite positions in organizations. Insurance may be a good place to start but so is an MBA degree. The Risk and Insurance Management Society recognizes the importance of a wide range of risk knowledge. Colleges and universities need to catch up with RIMS.

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

Cyber risk and its impact on hazard, operational and financial strategies. A terrorist can take down a building. A cyber-criminal can take down much more.

R&I: What does your family think you do?

My family members think I’m a professor. They do not seem to be too interested in my views on risk management.




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