Corporate risk management is changing as businesses adapt to a world filled with uncertainty. Over the past five years, companies have faced various global challenges that have forced them to rethink their approach to risk and resilience. This shift is highlighted in a recent report by Gallagher, which surveyed 1,200 executives worldwide.
The report shows that nearly two-thirds of these leaders believe their organizations now operate in a riskier environment than before. This change in mindset means that companies are focusing more on resilience and flexibility. Neil Hodgson, a managing director at Gallagher, noted that many businesses have moved away from the idea that major disruptions are rare. Instead, they recognize that crises can and will happen, and it’s crucial to prepare for them.
In response to the disruptions caused by the COVID-19 pandemic, 78% of firms have adjusted their revenue models or explored new markets. Many are adopting more cautious inventory strategies, expanding their supplier networks, and increasing their reliance on local vendors. There’s also been a noticeable rise in business continuity planning and investments in supply chain redundancy.
The report also points out new risks that have emerged, particularly in the digital realm. Cybersecurity, artificial intelligence, and automation are now seen as significant threats by 22% of respondents. Additionally, 19% identified operational risks stemming from inflation and geopolitical instability. People-related risks, such as talent shortages and employee engagement, are increasingly viewed as critical concerns.
In North America, the impact of climate change is becoming more pronounced. Extreme weather events are pushing climate risk to the forefront of business planning. Gallagher’s research indicates that losses from natural disasters, especially those not typically modeled, are increasing. Martha Bane, another executive at Gallagher, emphasized that these weather-related losses are prompting insurers to reconsider their strategies and adjust pricing.
The study also reveals a more strategic approach to insurance and risk management following the pandemic. Since 2020, nearly 20% of companies have added personnel focused on risk management, and a significant portion has maintained those roles. More than half of the firms have increased their insurance coverage, while 44% have introduced new types of policies.
Interestingly, 81% of business leaders now describe themselves as more open to risk than they were five years ago. This shift is particularly evident among larger organizations, which attribute their new outlook to better access to data and improved risk planning tools.
Aon, another major player in the risk management field, has identified four interconnected forces reshaping risk for businesses: global trade, technological changes, climate volatility, and workforce shifts. CEO Greg Case highlighted that these trends create complex challenges that require leaders to have access to integrated data and expertise to address linked risk issues effectively.
As companies continue to adapt to a rapidly changing world, their approach to risk and resilience will likely evolve further. The insights from Gallagher and Aon underscore the importance of being prepared for the unexpected in today’s business landscape.