Reprioritising Risk & Resilience

A Changing Risk Landscape

Before the COVID-19 pandemic brought a sweeping global health and economic crisis in 2020, Aon research found in 2019 that risk readiness had declined rapidly, reaching an all-time low in 12 years. An economic slowdown, business interruption, rapidly changing market forces, and failure to innovate were among the top 10 risks companies feared—while a pandemic or health crisis was at the very bottom of the list. Companies, governments, industries, and communities entered 2020 already concerned about the impact of a changing regulatory environment, geopolitical forces, cyberattacks, large-scale disruption, and more. Then, the unthinkable happened—and nearly all of those risks converged at once. In a new global survey, we examine the ways companies have reacted and responded to the crisis, the recovery moves they’re making now, and how they will reshape their business for a post-pandemic future. Already navigating through volatility pre-pandemic, today, as it continues to unfold, businesses and economies now face a drastically altered risk landscape and mounting long-tail risks, including climate change and a widening health and wealth gap.

The survey reveals a number of ways traditional business models and risk management approaches have left companies vulnerable. 82% of respondents said that prior to COVID-19, a pandemic or other major health crisis was not a top 10 risk on their organization’s risk register; their enterprise risk management (ERM) strategy and management failed to pick up the threat of the pandemic. And when it hit, their risk infrastructure struggled to cope with the initial response. Going forward, risk and business leaders must reprioritize risk—broadening their perspective and evaluating major shocks, not just anticipated losses, and elevating risk managers to an enterprise-level strategic role. By doing so, they will also be able to redefine resilience. Together, these are the post-COVID-19 imperatives required to reshape businesses into a more future-ready posture.

Companies must now ask what risk management and resilience should look like. Our research shows that building a resilient workforce is a priority. Protecting people and assets emerged as a top concern, with many companies focused on well-being, operational resilience and the retention of key people. Particularly in the early stages of recovery, survey respondents around the globe said protecting their people is the top priority. And 84% of HR professionals agree that workforce agility is extremely or very important—which means that building agility through new talent strategies will be critical.

There is a clear need to build a more integrated, agile and enterprise-wide risk program, as companies are likely to find gaps in their strategy and in the market. 88% of respondents said their business did not make a claim on its insurance program or through its captive triggered by COVID-19, indicating that insurance was not viewed as a solution to help finance the exposure and plays a small role in what are now the most significant risks facing companies. In the case of the pandemic, government response has been a necessary stopgap for a global event of this size, but the company response reveals a clear need for risk transfer solutions to support corporate mitigation efforts. Part of that journey will require companies to rethink access to capital alongside risk. As important is that the insurance industry innovates in response to companies’ changing needs, increasing global volatility and emerging risks. Successful solutions for the post-pandemic era will need to be more agile, strategic, targeted and scalable—but addressing underserved companies, economies and societies requires a fundamental shift in traditional insurance approaches.

There is no question that the COVID-19 pandemic will change the way companies operate forever. Among the top priorities for companies seeking to reshape their business are the new and accelerated use of technology, redeploying resources, workforce planning and rethinking the future of work—and these are only the beginning. How companies across the globe address new challenges and prepare for the future will be deeply intertwined with their approach to risk and resilience. The journey is different for every organization: 80% of respondents reported that their organization had moved beyond the first phase of react and respond, but this differs by region. This figure was higher in North America (89%) and lower in Europe, the Middle East and Africa (EMEA) at 73% and Latin America (LATAM) at 74%. Of those companies in later phases, 50% of companies report that they’re in recovery mode, and 30% are now in the reshaping phase, focusing on several key business priorities. The regional differences reflect fluctuating pandemic infection rates and impact. North American organizations were the highest proportion are in the recovery phase (59%) while organizations in Asia Pacific (APAC) reported they were in the reshape phase in higher numbers than the benchmark (36% of APAC organizations compared with 29% overall), likely because they faced the first and second waves of the virus earlier on.

Highlighting the challenge of the pandemic, the number of companies who have already moved beyond the react and respond phase was not materially higher for companies that did have a pandemic plan in place prior to COVID-19. Regardless of where they are now, the most effective organizations will be the ones willing to reprioritize risk and resilience, innovate and explore new solutions. In the insights that follow, we examine how organizations are responding, recovering and reshaping to emerge stronger and more resilient.

To explore the survey results click here