5th June 2019
CNA Hardy’s 2019 Global Risk & Confidence Survey finds that as global, interconnected risk becomes a reality, reputational risk is rising and business confidence is on the slide.
Research for the latest edition of the report highlights a clear East-West divide in terms of confidence. While optimism has fallen among executives leading European, UK and North American businesses, it continues to rise in Asia Pacific.
Ongoing discussions regarding how the UK is to exit Europe are having a markedly negative impact on business confidence on both sides of the Channel. In the UK only 36% of leaders are confident in the ability of their firm to grow and prosper–a far cry from May ’17 when 71% of business leaders were confident. In Europe only 50% are confident-a fall of almost one third in the past six months. In North America, confidence fell back 8% to 59% over the past six months as here too improving economic fundamentals continued to take a battering from economic and policy shocks.
Asia Pacific is the only region where confidence has risen (up 23% to 65%) in the past six months, and where executives globally believe there is the greatest capacity to drive growth.
Against this backdrop, the rate of investment in business fundamentals has fallen dramatically in the six months to May ’19, with investment in talent and research & development (R&D) among the hardest hit areas.
Ceo CNA Hardy,Dave Brosnan comments “Uncertainty is a key driver of high levels of caution about investment in business fundamentals. Companies are simply not prepared to put capital at risk in an environment where unpredictability reigns. The inevitable, but extremely damaging consequence is that fewer companies are maintaining investment in technology, R&D and talent to support the top line.”
Underpinning changes in business confidence is companies’ constant reassessment of the shifting risk environment. Globally, the percentage of business leaders who feel they operate in a moderate to high risk environment held broadly steady at 81%, with European business leaders the least risk averse(65%) and North American the most(87%).
Brosnan adds “The data shows a strong consensus among global business leaders on the direction of travel in terms of risk overall. This alignment of risk perceptions over time and across the regions demonstrates very clearly the reality of interconnected risk. From connected devices and international supply chains, to the global financial system, the potential for small problems to trigger unexpected cascading failures, is now all around us.”
Globally, economic risk is the biggest concern both now and in 12 months’ time, followed by cyber then tech risk. Economic risk–though remaining the most mentioned risk overall-is set to decline as political and reputational risk gain momentum.
As business leaders look ahead to May ‘20, we see that reputation risk is growing faster than any other–up 29% globally, a third (33%) in Europe and doubling in Asia Pacific between May ‘19 and May ‘20.
Brosnan continued “In an increasingly complex, tech-led, interconnected global economy, business leaders are being tested like never before. The result is that confidence has dipped, investment in business fundamentals is down across the board and reputation risk has emerged as the new threat that stalks the corridors of power.”
Businesses CNA Hardy spoke to were divided regarding the most significant challenges they face when dealing with brand or reputation risk. Managing the logistical challenge – securing board buy-in and implementing a timely plan of action–were two of the highest ranked priorities. But maintaining brand value was narrowly the top concern globally, with sentiment particularly marked in Asia Pacific and North America.
CNA Hardy is finding significant appetite among its broker network and insureds for deeper discussion and insight around the drivers of boardroom risk and strategies for risk prevention and mitigation.
Brosnan concluded “Reputation cover will become mainstream as boardroom risk is re-evaluated. In the same way the market has found a way to model the cost of non-physical damage business interruption claims as part of terror and political violence cover, we believe there is scope to model and mitigate the cost of managing reputation risk and the consequential damage to brand value caused by specific triggers.”
CNA Trends(195 articles)