European firms not addressing major risks: Survey

As many as half of Europe’s largest companies do not have up to date plans in place to deal with many of the risks they have ranked as their most important, according to a Global Risk Survey from Aon, Europe’s largest risk adviser and insurance broker.

Nearly half of those European companies surveyed (44%) have not formally reviewed or do not have a plan in place to deal with the risk they rated as the one that concerned them the most – damage to reputation.

”Its top ranking in the list of key concerns is down to the fact that executives now see reputation as a major source of competitive advantage,” said John Keeble, director of Aon Global. “While intangible, reputation is one of the most important corporate assets and one of the hardest to protect. The lack of preparedness reported for this and other key risks is both surprising and somewhat worrying.”

While more firms are prepared to deal with Europe’s next two most important risks, third party liability and business interruption, 47% have not formally reviewed or put a plan in place to address financial risk. “Most of Europe’s top firms have business interests and exposures outside of the EU,” explained John van der Steen, Chief Commercial Officer of Aon EMEA. “The greater your involvement in global commerce, the greater the financial risks you face. The impact from the sub-prime credit crisis in the US, for example, is going to hit financial institutions in the EU, with the ripple effect from that affecting companies in other sectors.”

The survey also showed that more than half of Europe’s leading companies are not prepared to deal with the impact of market environment risks (59%) or with regulatory and legislative changes (53%). Worryingly, some 42% of companies have no plans in place to deal with the leading human resourcing concern, failure to attract and retain staff.

While European firms compare favourably to counterparts based in Asia/Pacific and the Americas, areas of risks such as technology failure and loss of data, strong concerns in the Americas, and weather risks/natural disasters, the number two risk for Asia Pacific firms, failed to make the top ten in Europe.

“Europe’s largest companies are better prepared in many respects than their peers elsewhere in the world, but there still seem to be some worrying blind spots on their risk radar,” John van der Steen concluded. “The ability to understand risk is one of the fundamental drivers behind our global economy. Without risk we can’t make the investments and we can’t take the initiatives required to succeed.

“By taking a more integrated, systematic approach to understanding and managing risk,” John added, “organisations can begin to actively start turning risk into opportunity.”