Trends in economics, demographics and geopolitics along with rapid technology advancements are transforming traditional risks for global businesses, adding new urgency and complexity to old challenges, according to Aon’s 2017 Global Risk Management Survey.
Social media amplifies risk to brands
Damage to reputation/brand is the top ranked risk by businesses in Asia Pacific. Defective products, fraudulent business practices, inappropriate staff behavior and corruption continue to be key threats to reputation. Social media has amplified their impact, making companies more vulnerable.
With both smartphone and mobile broadband subscriptions population penetration levels at more than 100 per cent in Singapore and rising sharply across the region, these risks are becoming more volatile and difficult to prepare for and mitigate.
Further, in the age of Twitter or viral videos, damage to reputation can occur almost instantly. Since reputational events often arrive with little or no warning, businesses are forced to respond quickly and effectively. Companies must have a comprehensive reputation risk control strategy in place to preserve consumer trust.
Emerging cyber risks create new urgency
At number 7, cyber-crime enters the top 10 risk list for the first time in Asia Pacific as the frequency of cyber breaches increases and incident response plans become more complex due to regulation and mandatory disclosure obligations.
Organizations in Asia are 80 percent more likely to be targeted by hackers than other parts of the world with an average of 3.7GB of data stolen in each attack, amounting to hundreds of millions of records.
The regulatory landscape in Asia shifts towards more onerous data protection obligations for companies, led by China’s new Cybersecurity Law, effective 1 June 2017, which imposes strict rules regarding the transfer of data out of China.
Companies in Asia with exposure to EU citizen data must be aware of the General Data Protection Regulation commencing 25 May 2018, under which organizations, no matter where domiciled, can be fined up to 4% of global turnover for serious breaches.
In Singapore, the Personal Data Protection Commission began issuing fines for data breaches in 2016, and with a new Cyber Security Law set to be tabled in Parliament this year, companies must prepare for further government scrutiny of cyber risk preparedness and, possibly, mandatory reporting obligations in the event of a data breach.
Failure to attract talent inhibits innovation
Dramatically rising in the ranks from number 7 to number 4 this year, failure to innovate joins a long list of risks that can trigger costly business interruptions.
While Singapore, China, South Korea and Japan have progressed in the rankings of the world’s top innovative companies in the 2016 Global Innovation Index, the recent adoption of new technologies, such as internet of things, drones, driverless cars and advanced robotics have made businesses more aware of innovation related threats.
With the speed of change in the global economy, these risks are becoming more unpredictable to manage and participants find it difficult to prepare for them.
In addition, there is a clear link between the failure to attract and retain top talent and the ability to innovate. Failure to attract or retain top talent is the number 8 risk as organizations look to navigate competition and fuel growth through their people.
In Singapore, this risk becomes more pronounced as companies strive to hire high performers and strike a balance between local and foreign talent.
“We live in an era of unprecedented volatility and complexity,” says Sandeep Malik, CEO, Asia, Aon Risk Solutions. “Emerging influences are creating opportunity but present new risks that are increasingly interconnected and distributed across organizations. Businesses can no longer rely solely on traditional risk mitigation tactics. They must take an integrated approach to risk management to cope with these new challenges and drive business performance.”
The top 10 risks in Asia Pacific are:
- Damage to reputation/brand
- Regulatory/legislative changes
- Increasing competition
- Failure to innovate/meet customer needs
- Economic slowdown/slow recovery
- Business interruption
- Cyber-crime/hacking/viruses/malicious codes
- Failure to attract or retain top talent
- Major project failure
- Political risk/uncertainties