Most companies are worried about risks to their reputation, but more than half of the world's largest firms have no plans in place to protect them, a report by Aon's insurance brokerage warns.
In its "Global Risk Management Survey '07," the Chicago-based brokerage found that the number-one risk to all corporations is damage to reputation. The second major risk concern is business interruption, followed by third-party liability, distribution or supply chain failure, and rounding out the top five, market environment.
"Its top ranking in the list of key concerns is due to the fact that executives now see reputation as a major source of competitive advantage," said John Keeble, director of Aon Global, in a statement.
"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," Mr. Keeble added.
The survey, conducted over the Internet, was conducted in late 2006 to early 2007 involving 320 risk management respondents from 29 countries. The corporations involved had revenues equivalent to $1 billion or more. Seventy percent of the respondents were from publicly owned companies.
More than 60 percent of the respondents said they either have written plans in place or have undertaken a formal review of their risk for business interruption, third-party liability, and distribution or supply chain failure. Seventy percent said they have a plan or reviewed their business interruption exposure, and 75 percent have done something formally with their third-party liability.
More traditional risks, such as physical damage and failure of a disaster recovery plan, were at the bottom of the top-10 list of concerns, although planning and review for such risks were high.
However, the top risk concern--damage to reputation--found only 48 percent of corporations either have a plan in place or conducted a review of the exposure.
"Companies today are clearly less concerned about traditional risks, and senior management and risk managers now must deal with issues which are far more diverse, complex and esoteric," Aon said in its report.
More European companies have either a plan in place or have undertaken a review of damage to reputational risk, at 56 percent, than either American or Asia/Pacific nations, both of which were at less than 50 percent.
"Risk concerns for which survey respondents report the lowest state of preparedness are complex, difficult to control, carry a degree of unpredictability and are enterprisewide," the report noted. "These risks, while difficult to manage and in some cases not insurable, must still be addressed."
Business interruption was the second greatest concern for American companies, with review and planning at 67 percent. However, the concern was ranked third for both European and Asia/Pacific corporations, with review and planning at 78 and 69 percent, respectively.
Weather and natural disaster were the second major risk concern for Asia/Pacific corporations, a topic that did not show up in the top-10 global risk concerns for the American and European region corporations. However, planning and review of the issue by the Asia/Pacific corporations stood at only 41 percent.
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