Sunday, October 22, 2017

Aon Global Survey: damage to reputation, cyberattacks biggest risks to businesses

By on May 20, 2017

Damage to reputation/brand and cyberattacks are among the top-ranked risks to businesses in Puerto Rico and other jurisdictions, according to Aon’s Global Risk Management Survey.

While defective products, fraudulent business practices and corruption continue to be key threats to a company’s reputation, social media has greatly amplified their impact, making businesses more vulnerable. Businesses are also having more trouble trying to mitigate risks.

(iStock)

“All of these, in one way or another, are applicable to Puerto Rico, but some more than others because of the economic problems,” noted Rafi Díaz, Aon’s leader in property & contingency.

Conducted in the fourth quarter of 2016, Aon’s 2017 Global Risk Management Survey obtained information from 1,843 respondents at public and private companies around the world.

Cybercrime has joined a long roster of traditional causes that can trigger costly business interruptions, going to the No. 5 spot, the study said.

“It is now the top concern among businesses in North America, as the frequency of cyberbreaches is increasing and incident-response plans have become more complex due to regulation and mandatory disclosure obligations. This trend of disclosure obligations is also being observed internationally, for example, with the European Union General Data Protection Regulations going into effect in 2018. As a result, cyberconcerns will continue to be significant for businesses,” according to the Aon survey.

Díaz said the problem of cyberattacks against businesses came to the forefront in Puerto Rico because of the recent hacking that took place at the Treasury Department. However, Díaz said many companies are victims of hacking attacks that do not make it to the news because they are worried about the damage to their reputation or possible liabilities. “It may not be an outside attack. It may be a mistake made by an employee,” he said.

According to the study, political-risk uncertainties, previously ranked at No. 15, has now re-entered the top-10 risk list, taking the No. 9 position. At the same time, risk readiness declined from 39% in 2015 to the current 27%.

“Interestingly, developed nations that were traditionally associated with political stability are becoming new sources of volatility and uncertainty. This is a concern for businesses, especially those operating in emerging markets. Additionally, according to Aon’s latest 2017 Risk Maps, which cover Political Risk, Terrorism and Political Violence, trade protectionism is on the rise while terrorism and political violence ratings are the highest they have been since 2013,” according to Aon.

What we currently know about the global cyberattack

In Puerto Rico, Díaz said the political-risk uncertainties are in a way triggered by the appointment of the Fiscal Oversight & Management Board and its planned measures of austerity.

Aon said disruptive technologies and innovation are also becoming an emerging risk that participants ranked at No. 20 this year. However, the survey anticipated it to be on the top-10 list of risks by 2020. “With the recent introduction and adoption of new technologies, such as drones, driverless cars and advanced robotics, businesses have an increased awareness of the impact of innovation,” the survey said.

The study also found:

  • Moderate global economic growth offered organizations reason for cautious optimism, which resulted in economic slowdown/slow recovery dropping to the No. 2 slot in the top-10 risks list.
  • Increasing competition moved up to No. 3 this year. In many cases, competition has become so fierce that it is increasingly challenging for executives to clearly identify in what industry and with which companies they are competing.
  • Property damage, which was ranked No. 10 in 2015, has slipped to No. 13 as a risk.
  • Distribution or supply-chain failure has dropped to its lowest ranking since 2009, falling from No. 14 to No. 19.
  • Businesses worry that failure to attract or retain talent could become more pronounced if immigration policies shift in North America and Europe, where the tech industries have long been staffed with talented immigrants attracted from around the world.

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