Top 10 Risks in the Next 3 Years
In every survey, Aon asks participants to project the top five risks facing their organizations in the next three years. Their projections enable us not only to gauge what might be on the horizon but also to compare what they have predicted with the actual results. This exercise gives us the opportunity to see how risk perceptions change and what factors are driving this change.
In the 2019 survey, participants predicted that economic slowdown/slow recovery would remain in the top spot, followed by accelerated rates of change in market factors at number two and cyber attacks/data breach in third place. Nobody, of course, predicted a global pandemic and its transformational impact on organizations and people’s lives in general.
Out of the top 10 predicted risks for 2021, only two — accelerated rate of change in market factors and failure to attract and retain talent — did not make it into the actual top 10 risk list and were replaced by pandemic risk health crises and supply chain or distribution failure, respectively.
Interestingly, damage to reputation/brand and regulatory/legislative change were both predicted to come far lower on the risk ranking, at number 10 and 14, respectively, but have again been deemed far more important, which demonstrates that these risks remain a constant challenge and focus for organizations.
The rise of cyber attacks/data breach to number one and business interruption to number two was, although not correctly predicted, much more anticipated, as both risks were projected higher for the future risk list than they placed in the 2019 rankings.
Looking back at projections from 2019, the only real outlier is failure to attract or retain talent, which came in at number 13 globally in 2021. This risk appeared last in the top 10 risk list in 2017 (at number seven) and has since trended downward, giving us cause for concern as keeping or attracting talent is the key to organizational success.
Top 10 Risks in the Next 3 Years
In the next three years, the risk of cyber attacks/data breach is expected to remain at the top of the list, followed by economic slowdown/slow recovery and commodity price risk/scarcity of materials. Business interruption is expected to drop to rank four, and accelerated rate of change in market factors is predicted to rise to number five again.
The only other forecast re-entry is cash flow/liquidity risk at number nine, which suggests that respondents don’t think that the economy’s overall pace of change will slow down in the next three years. Risk managers and business leaders anticipate the rapid pace of change will bring about dynamic risk profiles, changing the way we work, the creation of new business models and how we consume.
Where Current Top 10 Risks Are Projected To Be in 3 Years
The risk of cyber attacks/data breach is predicted to remain in the top spot for the Asia Pacific region, Europe and North America; number two in the Middle East and Africa; and, for the first time, in the top five for Latin America. It is a top three future risk across all industry sectors, which further highlights the fact that this most complex risk will continue to be a core focus for businesses across the globe.
Failure to attract and retain top talent is predicted to be the number two risk in North America three years from now. We assume this is driven by an aging workforce (compounded by the political environment and COVID-19 stimulus in the current risk rankings) and a dramatic population decline.
Birth rates in North America and Asia are below death rates, indicating challenges in time to maintain the workforce without immigration. Furthermore, people are choosing to work for companies based not only on remuneration packages but also on their approach to staff wellbeing and companies’ social and ethical values, so the war for the best talent remains challenging. This, coupled with low birth rates and an aging workforces, is bringing the talent issue to the forefront for respondents in these regions.
Europe has dealt with these issues for a longer time and has designed suitable social programs in response. While businesses in the U.K., which have experienced talent shortages due to Brexit, perceive the failure to attract and retain talent to be the sixth most important risk in the current survey, they have not singled it out as a key threat in the future. Even though in the first half of 2021 the pandemic may have temporarily upstaged the fallout from Brexit, we predict that failure to attract and retain talent will emerge as a bigger issue in years to come for the U.K. and for the EU in general.