Helping businesses build resilience
Risk carriers must be resolute in their commitment to helping clients proactively manage their less predictable and harder-to-quantify risks
There will never be a time when businesses can sit back, content that all the risks particular to their industries are fully managed and accounted for. Some risks are known and have been testing resilience models for years if not decades, while others – as the events of the last 18 months have demonstrated – seemingly come from nowhere.
For many companies, Covid-19 has been the biggest catalyst of operational and strategic change in a generation. To understand how businesses have responded to this maelstrom and to provide a benchmark for resilience to and appetite for risk post-pandemic, Beazley surveyed 1,000 senior executives in the US and UK across 10 industries for the first in a series of in-depth reports.
The report gauges sentiment towards four key risk areas: technology, business, environmental and political and economic factors, and assesses the extent to which insurance is currently providing the safety net and support businesses need.
The research found that, perhaps unsurprisingly, 85% of business leaders consider the current business environment to be moderate to high risk. But at the same time, they feel able to cope – 91% of respondents feel moderately or highly resilient to risk.
However, the findings revealed a number of broad areas where there appears to be a mismatch when it comes to risk protection. Respondents viewed these as being high risk but believe they have a low level of resilience to them. Each is complex, interconnected and challenging for businesses to manage and may benefit from a combination of traditional and novel risk transfer.
Addressing supply chain is business leaders’ biggest ask of the insurance industry. Coverage does exist in a limited way but it is not considered to be ‘packaged’ in a way that is accessible to buyers. This lack of accessibility means it becomes a complex purchase negotiation with no certainty that risks will not slip between the gaps, which as an industry we need to address.
Among the industries reporting greatest anxiety around supply chain risk are manufacturing, energy and utilities and retail while marine and warehousing businesses also registered higher than average levels of concern.
Disruption risk remains very challenging from every perspective, however, it is disruption driven by technology that businesses feel particularly ill-prepared to face
Climate change is rapidly becoming a driver both of reputational risk and potentially D&O risk. The industry is under intense pressure to drive change through underwriting policy – withdrawing or restricting cover for businesses without a clear plan to manage their CO2 emissions. The industry needs to decide whether to underwrite this risk positively or via exclusion.
Healthcare and life sciences, hospitality and leisure are the sectors reporting highest levels of concern for this risk.
Within business risk – the second most important category of risk to leaders – supply chain risk again dominates board thinking, above boardroom, employer and even business interruption risk – which are perhaps viewed as less immediately pressing.
Concerningly, it also stood out as a risk that businesses feel ill-prepared to manage, with only 39% saying they felt ‘very prepared’. However, both business interruption and boardroom risk also attract relatively high levels of concern and score relatively low in terms of their level of resilience.
Finally, disruption risk remains very challenging from every perspective, however, it is disruption driven by technology that businesses feel particularly ill-prepared to face. Hospitality, entertainment and leisure is the sector that is particularly exposed, with business leaders ranking this both a high risk and an area of poor resilience. Marine and warehousing and, to a lesser extent, retail are in a similar position. Real estate and manufacturing are among the sectors most concerned by this risk.
Despite the litany of challenges, one of the key lessons from our research is that, by and large, businesses have survived, adapted and thrived. Almost half feel more resilient than one year ago and 84% are confident they will be even more resilient in a year’s time. This is very positive given the challenges businesses have had to contend with over the last 16 months.
However, despite the green shoots of economic recovery we are not out of the woods yet. As lockdowns end and government stimulus packages are withdrawn, organisations will need a clear view of their evolving risk exposures.
As risk carriers we must be resolute in our commitment to supporting clients in proactively managing their less predictable and harder to quantify risks to help build overall resilience.