Technology, supply chain and regulatory risks top concerns for businesses across EMEA

Risk managers identified technology, supply chain and regulatory as the “big three” risks currently causing their organisations the greatest concern, according to ACE’s Emerging Risks Barometer 2015.

People risk sits just outside the top three, while geopolitical risk completes the top-five emerging risk categories.

As part of the barometer, the insurer surveyed 500 companies in EMEA. It found 43% of businesses say that technology risk – which includes cyber-attack, data loss and business interruption as a result of systems failure – is currently among their greatest concerns.

Tech also tops the list of risks that businesses expect to have the biggest financial impact for their operations in the next two years. Technology plays a critical role in almost every business’ strategic planning, yet, the research shows that companies may not be focusing their efforts in the right areas, owing to a lack of knowledge about the most likely sources of threat. It is indicative that less than one-quarter (23%) of respondents say their biggest concern is violation of customer data, in spite of the huge potential financial and reputational cost of such attacks.

Supply chain risk ranks second, named by 31% of respondents. Supply chain topped ACE’s 2013 barometer, and remains a top concern for businesses two years after.

With more companies expanding into new and often emerging markets – using more complex and extended networks of suppliers and partners – the supply chain is at once a growth enabler and a key source of risk. However, in what is one of the survey’s clearest indications of how different areas of risk are increasingly interconnected, businesses are now less concerned about interruption caused by natural disasters and are focusing on issues that can severely harm their corporate reputations.

Survey respondents rank unethical labour practices as their biggest supply chain worry. More than six out of ten (61%) admit they cannot always vouch for the ethical and trading standards of every company on which they rely.

Regulatory and compliance risk ranks third, named by 27%. As companies pursue growth on a global scale, regulation is becoming an increasing source of concern with multinational organisations now facing a patchwork of regulatory regimes across markets and jurisdictions.

Importantly, 56% of respondents say their company directors may not fully understand the governance and compliance requirements in every country for which they have oversight/responsibility. Seven out of ten risk managers are concerned that regulatory demands are diverting resources from other areas of the business.

Risk managers that took part in the survey believe that the insurance industry has a critical role to play in helping businesses manage this new wave of emerging risks. More than four out of five respondents (82%) say insurance plays an important role in their management of technology risk, for example, while 80% of respondents expect insurance to be very or fairly important in three years’ time to help manage the top-three emerging risks.

However, survey results indicate that the industry cannot be complacent. Risk managers say they want better solutions for managing non-physical risks. Almost half (45%) believe the industry could improve its offering around technology risk. Risk managers also want to see the industry make progress around people risk (28%) and supply chain risk (28%).

Andrew Kendrick, president, ACE European Group, said: “Our survey results show that European businesses are now facing a landscape of new, complex, risks that change at an astonishing rate, defying previous categorisations. In this new environment, piecemeal responses will not succeed. Effective action will require board-level commitment, an integrated approach, and the development of a clearly understood risk management culture across organisations. These imperatives are not new, but their urgency is increasing.

“Encouragingly for the insurance industry, this report suggests that risk managers regard insurance as a key part of the solution. But our risk managers warn that this will only remain the case if the industry invests more energy in understanding and developing solutions around non-traditional, non-physical risks. We at ACE are already responding to the challenge. By acting as true business partners and building long-term, strategic relationships with risk managers we stand ready to help them and their organisations manage effectively those emerging risks.”