AUSTRALIAN CORPORATIONS have nominated their top risk as brand and image, ahead of technology and data recovery, corporate governance and human resources. But a survey of more than 270 companies by insurance broker Aon found heightened levels of importance given to almost all risk categories used in the survey compared to previous years.
Compliance breaches, product quality, ethics, social responsibility and community relations were among the worries that companies saw as potentially influencing their brand and image, said Ross
Castle, Aon’s national manager of research and development. “The volatile business environment, the prevalence of major loss events and the additional burden of managing diverse and complex risk issues have all added to an increased awareness and concern about risk across the business community,” Castle told Risk Management.
“This was clearly evident from the survey with the level of importance of 17 of the top-20 key risk factors rated higher by respondents than in previous surveys.”
Brand and image slipped to third and fourth place respectively from 2005-06 to 2006-07, when it was overtaken by corporate governance as the leading concern in the annual survey. But apart from “legal” risks in 2004-05, the top four have remained the same since 2003-04.
A large minority of respondents did not undertake any review of their tolerance for insurable risk, rising to 53 per cent for companies with revenues up to $100 million.
Castle said it is important for any organisation to define their level of risk tolerance to ensure there was a “consistent approach to risk awareness and level of risk reporting across the organisation”.
However, the total cost of insurable risk fell for the fourth year in a row, down this year by 8 per cent to $6.14 per $1000 of revenue.
This was largely due to reductions in premiums, but also reflected a “low claims environment”, said Castle.
The 2007/08 Risk Management and Total Cost of Insurable Risk Survey said more than half of the companies were also actively “selling” their risk profiles into the insurance market. Compared to those who didn’t do this, these companies achieved a median 27.4 per cent reduction in their insurable risk costs.
Corporate governance was ranked sixth among risk concerns in 2003-05, but jumped into the top four in subsequent years.