Doing business has become more difficult and uncertain since 2021 and shortages of talent in key areas are hampering risk management efforts, according to a recent survey by Aon.

While the risk rankings of the bi-annual survey show little change, the conditions in which those increasingly inter-connected risks arise has evolved rapidly, the report said. Cyber-attacks and data breaches, business interruption, economic slowdown and the failure to attract or retain talent took the four top places respectively.

Compounding effects

The report said that talent risk was at its highest since the report began. “Understaffing was a legacy of the pandemic that is today being exacerbated by a persistently tight labour market and an aging workforce,” the report said. “Past demographic analyses predicted a talent drain, but concern over the enormous scale of the human-capital problem is apparent in the responses to our most recent survey.”

This shortage not only affects business’ ability to achieve their strategic goals and depress revenue, but it also impacts risk management. “Shortfalls in talent, workforce or critical specialised skills can hamper innovation and competitiveness and increase exposure to cyber-attacks, regulatory breaches, supply chain issues, business interruption and reputational damage,” the report said – compounding risks from other areas.

Risk readiness

Businesses that took part in the survey said that they were most ready to cope with cyber-risk and data breaches (89 per cent). And while preparedness on issues such as business interruption (74 per cent) and supply chain (63 per cent) were reported by most businesses, only four in ten respondents said they could cope with an economic slowdown. That was the second most reported cause of loss of income (55 per cent) after commodity prices and scarcity (64 per cent) in this year’s survey.

The report said that inadequate quantification of the top ten risks accounted for much of their persistence – as had their interconnectedness. Risk managers needed to be better able to deal with today’s volatility, it concluded. “Risk management frameworks should be strengthened to help organisations and their balance sheets withstand the mounting volatility and velocity of the risk landscape as well as economic uncertainty.”